{"id":1015,"date":"2021-12-29T04:21:38","date_gmt":"2021-12-29T04:21:38","guid":{"rendered":"https:\/\/uk.legalvision.com.au\/?p=1015"},"modified":"2026-01-08T09:04:06","modified_gmt":"2026-01-08T09:04:06","slug":"structure-online-business","status":"publish","type":"post","link":"https:\/\/legalvision.co.uk\/business-structures\/structure-online-business\/","title":{"rendered":"Choosing a Structure for an Online Business"},"content":{"rendered":"\n

Are you thinking of setting up an online business<\/span>? Maybe you are looking to sell products you make to consumers or a business-to-business (B2B) service like affiliate marketing. However, you may be unsure how to organise your business. There is a range of legal and business jargon that can be confusing to understand<\/span>. For example, incorporated versus unincorporated businesses, limited liability companies, and partnerships. <\/span><\/p>\n\n\n\n

This article will explain the difference between incorporated and unincorporated business structures and their advantages. We also discuss the four most common types of business structures used by online companies in England.<\/span><\/p>\n\n\n\n

Unincorporated vs Incorporated Businesses <\/span><\/h2>\n\n\n\n

The most basic distinction between different business organisations is asking if they are incorporated or unincorporated.<\/span><\/p>\n\n\n\n

Unincorporated Businesses <\/span><\/h2>\n\n\n\n

Unincorporated businesses come into existence automatically. Therefore, if you are trading or intend to trade, the law will call you a sole trader (or sole proprietor). Likewise, if you are in business with another person, you will have a partnership.  <\/span><\/p>\n\n\n\n

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This can be advantageous because it means there are no formalities or paperwork necessary. You simply need to start trading and account to <\/span>HM Revenue Council (HMRC)<\/span><\/a> for your tax liability each year.<\/span><\/p>\n<\/div>\n\n\n\n

Importantly, an unincorporated business does not have a separate legal existence from its owner(s). This means that <\/span>the law considers your personal assets and business assets a<\/span>s the same. Likewise, in the event your business is unable to meet its liabilities (such as its debts), <\/span>a court can force you to sell your personal assets to cover your business\u2019 debts. <\/span><\/p>\n\n\n\n

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As an example, you may purchase a work computer to be used exclusively for your own business. You may enter into a contract with a web hosting company. You also have a house and a car, which you consider separate from your new business.<\/p>\n

However, if you do not pay the web hosting company, they could sue you for the debt, and the court has the power to recover the money from your personal assets.<\/p>\n<\/div>\n\n\n\n

As you can see, when trading as an unincorporated business, there is nothing between your business\u2019 assets and liabilities.<\/span><\/p>\n\n\n\n

Sole Traders<\/span><\/h3>\n\n\n\n

This is the most common kind of unincorporated business in the UK, with more than 3.5 million active sole traders. This comes into being automatically at the point you start trading. <\/span><\/p>\n\n\n\n

While no registration is necessary, you are personally liable to HMRC to <\/span>account for your tax liability<\/span><\/a>. Therefore, you should keep records of your business sales and expenses<\/span>. This is so you do not over or underpay the taxes you owe. <\/span><\/p>\n\n\n\n

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If your revenue (i.e. the total amount of money you bring in) is more than \u00a385,000, you will need to register for <\/span>VAT (Value Added Tax) through HMRC.<\/span><\/a><\/p>\n<\/div>\n\n\n\n

As a sole trader, you are free to adopt a brand, including a business name, for your business.<\/span> This is the case even if you have not incorporated. However, you cannot use certain prefixes, like:<\/span><\/p>\n\n\n\n