What kind of business is right for your business?
When starting up a new business it’s important to consider which legal platform is most suited to your needs. You might even need to consider changing the form of your business as it evolves. The Corporate and Commercial team at Taylor & Emmet LLP are here to help and advise you on the best legal platform for your business.
Different business platforms
To get you started, we have outlined some of the characteristics of various platforms below.
Sole Trader – a sole trader operates the business as an individual. All assets of the business will be owned by you, likewise, all debts or liabilities of the business will be your responsibility. Running a business as a sole trader is relatively unregulated, generally has a low running cost and it is often easy to start or finish the business.
Partnership – a partnership is very similar to a sole trader, except there is more than one person making contributions and decisions about the business. Each partner is entitled to a share of the profits but is also liable for a share of the debts and other obligations. You will usually require a partnership agreement, which will set out how much each individual has contributed to the partnership and how any profits and losses will be shared amongst the partners. A partnership agreement tries to pre-empt any future disputes and provides protection by outlining what will happen in future events.
Limited Liability Partnership – a limited liability partnership is a hybrid between a company and a partnership. This type of partnership is still governed by an agreement, although the liability of the members is limited to their contributions to the partnership. It also has the benefit that it is considered to be a legal entity (see company below). However, as with a Company, certain information must be made public, such as details of the partners and the accounts of the partnership.
Company – the key difference about a company is that it is legal entity, meaning the company can enter into contracts and agreements through its directors. Operating as a company also means that your liability as an individual can be limited. A company is owned by those who own shares in the company, known as members. Decisions about the day to day running of the business are made by the directors of the company. In a small company, the members and the directors are often the same people. Operating as a company is appropriate for any business; though it’s particularly used for family run businesses and is beneficial when a business grows with several employees or where there are numerous decision makers.
Which is best for your business?
The advantage of limited liability means that we would normally advise you to run a business through a company. However, you should ensure you are happy that some of your personal details, such as your full name, and the annual accounts of your company will be made publicly available through Companies House. You should always speak to your accountant to discuss whether there are any tax advantages or disadvantages of incorporating your business into a company.
When you have considered the above, speak to the Corporate and Commercial Team at Taylor & Emmet to find out how we can help you. Taylor & Emmet will get to know you and your business so that we can offer advice that is tailored to your specific needs. To get in touch contact Rob Moore on 0114 218 4051 or at firstname.lastname@example.org.
We will be continuing our ‘Starting a Business’ series with an in depth look at the different platforms and the practical steps that you need to take when you have decided which platform is right for you.