Legal Services for Business

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Legal Services for Business across the South, the South East and London

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Email: lynda.lawson@legalservicesforbusiness.co.uk

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You are here: Home / A quick guide to business structures

A quick guide to business structures

Two high level comparisons are provided below.  These are the differences:

  1. Between a Sole Trader (self employed) and a Limited Company
  2. Between a Partnership and a Limited Liability Partnership (LLP).

Differences between a Sole Trader (self employed) and a Limited Company

StatusSole TraderLimited Company
Business ActivityYou can run your own business under your own name or a trading name and can employ staffThis is a separate legal entity from you as its manager and shareholder which runs up its own debts and can own assets
Tax TreatmentYou are taxed as an individualThe company will be subject to corporation tax and the directors / shareholders salaries / dividends will be liable to income tax
Personal LiabilityThere is no distinction between your assets and those of the business so If the business fails, your assets are at riskLiability of the shareholders is limited to the amount they have paid or agreed to pay for their shares
RegulationYou are unregulated, although there may be other regulatory controls depending on the nature of the business you are operatingThe business must be operated in accordance with the provisions of the Companies Act 2006
PrivacyPublic Record Filing requirements:

No requirement.
Public Record Filing Requirements:

– Memorandum and Articles of Association (companies formed after 1st October 2009, no longer be required to file a Memorandum of Association);
– Confirmation statements return detailing its registered office, directors (and secretary, if applicable) and persons with significant control;
– Annual accounts within 9 months of its financial year end; and
– Certain changes to its constitution such as allotment of shares, certain resolutions, alterations to its Articles of Association, reductions in capital and the appointment / resignation of the directors and secretary and changes to persons with significant control
CapitalAny effort to secure finance is likely to require personal guarantees and/or security over your personal assetsIt may be possible to secure finance for the business against the assets of the business, although in some cases, lenders may require personal guarantees and/or security over the assets of directors

The differences between a Partnership and an LLP (Limited Liability Partnership)

StatusPartnershipLimited Liability Partnership
Business activityThe nature of the relationship between partners is typically recorded in a partnership agreement which is a private document negotiated by the partners. In the absence of any agreement, the relationship will be governed by the Partnership Act 1890 which in essence treats all partners as equal.The structure of the relationship between partners is typically recorded in a limited liability partnership agreement which is a private document negotiated by the partners. In the absence of any agreement, the relationship will be governed by the Limited Liability Partnership Act 2000.
Tax treatmentThe partners will be liable to pay income tax.The partners will be liable to pay income tax.
Personal liabilityThere is no distinction between the assets of the individual partners and those of the business so if the business fails, your assets are at risk and you will also be liable for the negligence of your fellow partners.The liability of the partners is limited to the capital contribution each has made to the business.
RegulationThe business is unregulated, although there may be other regulatory controls depending on the nature of the business you are operating.The business is required to comply with certain statutory requirements.
PrivacyPublic Record Filing requirements:

No requirement.
Public Record Filing Requirements:
– confirmation statement detailing its registered office and its designated members and members;
– Annual accounts within 9 months of its financial year end; and
– Details of changes in membership.
CapitalIt may be possible to secure finance for the business against the assets of the business, although in some cases, lenders may require personal guarantees and/or security over the assets of the partners.It may be possible to secure finance for the business against the assets of the business, although in some cases, lenders may require personal guarantees and/or security over the assets of the partners.

Legal Services for Business provides advice on company law to businesses across London, Hampshire, Surrey and Berkshire. My details are listed below should you wish to contact me.

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Call: 07789 773 985
Email: Lynda Lawson

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