Legal

Which legal structure can I choose?

There are the following common legal structures for companies in UK:

Sole Trader
Limited Company (ltd.)
Public Limited Company (plc.)
Limited Partnership (LP)
Limited Liability Partnership (LLP)
Unlimited Company
Community Interest Company
Charitable Incorporated Organization
Industrial and Provident Society

The common business legal structures for entrepreneurs are explained below in more details:

Sole Trader

If you start working for yourself, you’re classed as a self-employed sole trader- even if you’ve not yet told HM Revenue and Customs (HMRC). As a sole trader, you run your own business as an individual. You can keep all your business’s profits after you’ve paid tax on them.

Business is owned by I person (the owner)
The owner keeps all the business profit after taxes
Can employ staff
Owner responsible for losses the business

Read more about how to set up as sole trader.

Private Limited Company (ltd.)

You can set up a private limited company to run your business, which is responsible in its own right for everything it does and whose finances are separate from your personal finances. Every limited company has ‘members’ - the people or organisations who own shares in the company.

Finances separated from personal finances
Directors or shareholders financially back the organisation up to a specific amount
Directors are responsible for running the company. Directors often own shares (but they don’t have to)
Possible to be converted to a Public Limited Company

Read more about setting up a private limited company.

Public Limited Company (plc.)

A Public Limited Company differs from the much more common Private Limited Company primarily in that it can offer its shares to the public, although many PLCs are effectively privately owned until they become listed on either the London Stock Exchange or the Alternative Investments Market AIM.

There is no obligation for a PLC to offer its shares to the public or indeed to become a listed company. It is also possible to convert a Private Company to a Public Company and vice versa. Many companies that have become listed PLCs started life as Private Limited Companies.

Finances separated from personal finances
Shares can be exchanged on the stock market
Minimum capital £50,000

Read more about setting up a Public Limited Company.

Limited Partnership

Your can set up a Limited Partnership to run your business with more persons, who act as General Partners or Limited Partners. This is suitable if you don’t want to be personally responsible for a business’ losses

Business profits are shared among the partners. Each partner pays tax on their share of the profits.
Liability is split between the partners
General partners are liable for all debts and obligations of the firm, while limited partners are liable only to the amount they initially invest in the business

Limited Liability Partnership (LLP)

The Limited Liability Partnership is a comparatively new type of business structure which became available in 2001. It is a hybrid between a private company limited by shares and a partnership. An LLP is a separate legal entity conferring full limited liability on its members. It is created by registration at Companies House.

There must be at least two members, but there is no upper limit
An LLP is subject to the same rules as a private limited company for the registration of accounts at Companies House, and the auditing of its accounts
Each partner pays taxes on their shares of profit
Liability limited to the amount of money invested by each partner

Read more about how to set up and run an LLP.

Community Interest Company

The Community Interest Company (or CIC) is a relatively new type of company established by the Companies (Audit, Investigations and Community Enterprise) Act 2004 and regulated by The Community Interest Company Regulations 2005. The CIC model is designed to provide an effective legal form for enterprises which aim to provide benefit to the community or to trade with a “social purpose,” rather than to make a profit.

Designed for social enterprises
Flexible and easy to set up

Read more about setting up a social enterprise.

How do I set up a company in UK?

Below is a quick summary of steps of setting up a company in UK

Check name for uniqueness at the company names index database on the web
Prepare memorandum and articles of association; fill out and sign Form IN01 (application for registration).
File incorporation documents with the Registrar of Companies at Companies House
File incorporation documents with the Registrar of Companies at Companies House
File incorporation documents with the Registrar of Companies at Companies House
Sign up for employer’s liability insurance

For more information about the business registration process in UK, you can visit here.

Starting or running a business?