There are a lot of things to think about when you’re starting a business. But one of the most important is deciding what business structure to use.
There are a lot of different types of business structures, and each one has its own benefits. So it can be tough to decide which one is right for your company.
In this article, we’ll take a look at the different types of business structures and help you decide which one is right for you. We’ll also give you some tips on how to set up your chosen structure and what the ongoing responsibilities are for business owners.
What is a business structure and why do you need one?
Before you can start trading as a business in the UK, you need to choose a business structure.
There are four main types of business structures: sole trader, limited company, partnership and limited liability partnership.
Each has its own advantages and disadvantages, so it’s important to choose the right one for your business. For example, a sole trader is the simplest and one of the most common type of business structure in the UK.
It’s relatively easy and inexpensive to set up, and you have complete control over your business.
However, you’re also personally responsible for all debts and losses incurred by your business. A limited company is a more complex business structure, but it offers limited liability protection for its shareholders.
This means that each shareholder is only liable for the amount of money they’ve invested in the company.
Partnerships and limited liability partnerships are similar to sole traders, but with two or more owners.
As with sole traders, partners are personally responsible for all debts and losses incurred by the business.
However, limited liability partnerships offer some protection for individual partners against debts incurred by the business.
When choosing a business structure, it’s important to consider the size and scale of your business, as well as your personal circumstances.
You should also seek professional advice to make sure you choose the right option for your business.
According to Adams Law LLP setting up a limited company can have numerous benefits (depending on the location of the company you set up):
Setting up a limited company has a number of benefits, the most important of which is limited liability.
This means that the shareholders are only liable for the amount of money they have invested in the company, and they will not be held responsible for any debts incurred by the business.
This provides a level of protection for the shareholders, which is particularly important in businesses that are high risk.
In addition, a limited company is a separate legal entity from its shareholders, meaning that it can enter into contracts and own property in its own name.
This can be useful for businesses that want to raise investment, as it allows them to offer shares to investors without putting their personal assets at risk.
Finally, limited companies are often seen as more efficient from a tax perspective, as they are only taxed on their profits. This is in contrast to sole traders and partnerships, which are taxed on their total income. As a result, setting up a limited company can be an attractive option for many businesses.