The right legal structure for a UK startup depends on the founders\u2019 liability, tax, administration, ownership and funding plans. UK founders usually choose sole trader status, a partnership, a private limited company or a limited liability partnership. Sole traders and ordinary partners remain personally responsible for business debts because the business lacks separate legal identity. A private limited company or limited liability partnership has its own legal identity. The entity can hold assets, enter contracts and owe debts. A company limited by shares must have at least one shareholder, who may also act as a director. This article compares the four main startup structures and explains how ownership choices can affect future investment.<\/p>\n\n\n\n
The most basic distinction between different business structures is the difference between incorporated and unincorporated businesses. The two unincorporated business structures we will look at are:<\/p>\n\n\n\n
The two incorporated business structures we will look at are:<\/p>\n\n\n\n
A critical legal distinction you should note regarding an unincorporated business is that it does not have a separate legal existence from its owners. The law considers your business assets and liabilities the same as your personal assets and liabilities. If your business incurs a liability that it cannot repay, your creditors can come after your personal assets, like your house and other possessions. Even with insurance, your policy may not extend to this situation. <\/p>\n\n\n\n
This is the most common kind of unincorporated business in the UK, with more than 3.1 million active sole traders. You could be selling luxury watches, cutting hair, or babysitting. Unless you have taken other steps, you are automatically carrying on as a sole trader.<\/p>\n\n\n\n
To set up as a sole trader, you need to register for Self Assessment with Her Majesty\u2019s Revenue & Customs<\/a>\u00a0(HMRC<\/strong>).<\/p>\n<\/div>\n\n\n\n A partnership will automatically arise when two or more people operate some enterprise with a common view of profit. These are sometimes called \u2018ordinary partnerships\u2019, \u2018general partnerships\u2019 or \u2018unincorporated partnerships\u2019.<\/p>\n\n\n\n The Partnership Act 1890<\/em> governs partnerships. Unless there is an express agreement (written or oral) that contains the partnership terms, the Partnership Act <\/em>governs the partnership terms. <\/em>Therefore, you may want to come to an express agreement over the duties one partner owes the rest and vice versa.<\/p>\n\n\n\n Given that the legislation is over 130 years old, many implied terms are outdated and unusual. For example, if you want to remove a partner, you will need the consent of every partner in the partnership, including the one you want to remove.<\/p>\n<\/div>\n\n\n\n Additionally, unincorporated partnerships cannot own assets in the partnership\u2019s name. Practically, any sort of asset like an office or piece of machinery you want to use to make a profit will be purchased in your partners\u2019 name and be held \u2018on trust\u2019 for the other partners.<\/p>\n\n\n\n\n\n Continue reading this article below the form\n <\/i>\n<\/a>\nPartnerships<\/h3>\n\n\n\n