Summary table of business structures
When you are starting a new business, it can be difficult to know which structure is right. Here we provide a summary of the different types of business structure, covering the most important elements of each, such as the associated liability, costs and the law that applies.
This will give you a broad overview of the options, however it is beneficial to get expert business law advice to ensure your venture gets off to the best possible start. At Ironmonger Curtis, our business solicitors are on hand to provide tailored legal advice for start-ups in the UK. We take the time to listen to your commercial ambitions and provide specialist advice to help you achieve them.
Below is a summary of the key business structures:
|Business Structure||Liability||Expense||Management||Raising Finance|
|Company||Limited liability – no personal liability unless you have personally guaranteed the debt of the company.||There is a cost of setting the company up and maintaining the registration. Annual accounts have to be filed online at Companies House, which incurs an annual fee.||The Companies Act 2006 sets out how a company is to be run. These must be adhered to.
It is advisable for companies to have a shareholders’ agreement in place to further govern the running of the company.
|Investors and lenders tend to prefer company structures as a way to invest in the business. Shares can be issued to investors. Lenders will increasingly look to director/shareholders to provide personal guarantees for the company.|
|Partnership||You are personally liable for all the debts of the partnership, with each partner being jointly and severally liable.||There is no set up fee, and the general costs of running the partnership are lower as there are no annual accounts to be filed.||Generally, there is greater flexibility in how the business is run as the Partnership Act 1890 is very broad. It is advisable to have a properly drawn up partnership agreement to further govern the partners.||It can be more difficult for an investor to invest in a partnership. Any loan will be in the individual names of the partners.|
|Limited Liability Partnership (LLP)||You have limited liability.||There is a cost of setting the company up and maintaining the registration. Annual accounts have to be filed online at Companies House which incurs an annual fee.||There is legislation in place to govern how an LLP is governed.
It is important to have a properly drafted LLP agreement to govern the operation of the LLP.
|Like a company, investors often prefer an LLP structure as it allows the investor to have the same limited liability.|
|Sole Trader||You have personal liability.||There are very few costs, if any, in setting up as a sole trader.||All decisions can be made by you. There is a great degree of flexibility.||Any investment or lender will look to loan to you directly.|
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