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Business Types
Being a sole trader is the
simplest way to get started in business. Once you have
informed the government agencies of your intentions to go
self-employed, you can start trading right away (subject to
any specific licenses you might require in your line of
work).
As a sole trader, you can
quickly adapt to changes in your business with minimal
bureaucratic procedures required and you have complete control
over your business and accounting affairs. However, a sole
trader is also ultimately responsible for any liabilities
should anything go wrong. It is worth spending time
considering which company set-up format is best for you.
In a partnership, two or more
people share the risks, costs and responsibilities of being
in business. Each partner is self employed and takes a share
of the profits. Usually each partners shares in the decision
making and is personally responsible for any debts that the
business runs up.
Unlike a limited company, a
partnership has no legal existence distinct from the
partners themselves. If one of the partners resigns, dies or
goes bankrupt, the partnership must be dissolved although
the business can still continue.
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A partnership is a relatively
simple and flexible way for two or more people to own and
run a business together. However partners do not enjoy any
protection if the business fails.
An LLP is similar to an
ordinary partnership in that a number of individuals or
limited companies share in the risks, costs,
responsibilities and profits of the business.
The difference is that
liability is limited to the amount of money they have
invested in the business and to any personal guarantees that
are given to raise finance. This means that members have
some protection if the business runs into trouble.
Limited companies exist in
their own right. This means the company finances are
separate from the personal finances of their owners.
Shareholders may be individuals or other companies.
They are not responsible for
the company’s debts unless they have given guarantees (of a
bank loan, for example). However, they may lose the money
they have invested if the company fails.
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