Types of businesses
An important consideration for any mum starting up in business is which type of business vehicle to use. The tax can be complicated and the terms confusing. Below you will find a summary of the different types of business structures and information on where to seek further help and advice.
Different types of businesses:
Sole Trader: Being a sole trader is the simplest way to run a business - it does not involve paying registration fees, and record keeping and accounting is reasonably straightforward. And as a sole trader you get to keep all the profits. Remember, you are personally liable for any debts that your business runs up which make this a risky option for businesses that need a lot of investment and financing. It is however simple to set up and might be ideal for starting up an enterprise with little running costs.
Partnerships: There are three types of partnerships: ordinary partnerships, limited partnerships and limited liability partnerships (LLPs)
An 'ordinary' partnership has no legal existence that is distinct from the partners themselves. This means that if one of the partners resigns dies or goes bankrupt, the partnership must be dissolved - although the business may still continue.
A limited partnership is made up of one or more general partners and one or more limited partners.
General partners are jointly liable for any debts owed by the partnership and so are equally responsible for paying off the whole debt.
A limited partner's liability is limited to the amount of money they have invested in the business and to any personal guarantees they have given to raise finance.
Limited Liability Partnerships allow business partners to enjoy the benefit of limited liability, avoiding the liability problems that apply to ordinary partnerships. In this form of company there are no shares, and tax arrangements remain the same as for ordinary partnerships.
Limited liability companies are the most common form of business registration in the UK. Those which are unlimited are uncommon and rare by comparison. The main feature of limited liability companies are that they afford the owners (shareholders) and the persons who run it (directors) protection of their personal wealth.