The main types of business organisation in the UK are the Sole Trader, Partnership, Franchise, Private Limited Company and Public Limited Company.
In setting up a new business, you will make observations and projections about the market for your products and services, and take decisions about liability, taxation, expansion plans, ownership and the legal form of the business. Each business organisation and location are different and will need to observe different regulations.
Sole Trader, Partnership, Franchise, Private Limited Company and Public Limited Company business organisations in the UK are summarised below.
Before you make a final selection of your business type and start your business, you are strongly recommended to obtain professional advice from accountants and solicitors.
The simplest form of business in the UK is the Sole Trader. The Sole Trader owns and runs the business, uses their own personal capital to get started and has complete control of the business. The Sole Trader has fewer legal formalities and obligations associated with other types of businesses. Start up and running costs are relatively lower.One negative feature may be the difficulty to increase investment in the business; as the Sole Trades capital is usually limited, the business may not be able to respond to the requirements of expansion brought about by competition and market demands. The personal liability of the Sole trader is unlimited for any losses of the business.
Ordinary Partnership is similar to Sole Trader except in partnership two or more self-employed people share the decision-making, risks, costs, and obligations of the business. Each partner is personally responsible for any debts of the business. Unlike a limited company, if one of the partners resigns dies or goes bankrupt, the partnership must be dissolved.There is a Limited Liability type of Partnership similar to an Ordinary Partnership with the difference of limitation of liability to the amount of money the partners have invested in or guaranteed for the business. Another difference is the requirement of registering at Companies House.
|Private Limited Company
Liability is limited for the owners (Shareholders) of Limited Companies. Other than liability limitation, there may be reasons why you may wish to choose to set up a Limited Company. You can find more information about private limited companies in the About Private Limited Companies section.
|Public Limited Company
Public Limited Company is a type of limited company whose shares may be offered for sale to the public.
Franchising is trading under the trade name of a third party under a licence granted by the third party. The third party retains control over the quality and standards of the business and the way it is run.