If you are starting up a business, you firstly need to decide what kind of business you think is best suited to your needs and financial situation. The main types of business include:
Sole trader – Conducting business as yourself, even if you use a fictitious name. Simple to set up but does not cover asset protection. You are personally liable for everything your company does, and are responsible for protecting your assets accordingly.
General Partnership – Relatively risky agreements between two or more individuals in which they conduct business as ‘partners’. Anything that one partner does affects all partners. To protect partners’ individual assets, you should draw up a legally binding partnership agreement. Sleeping partners may also be involved – they own a share of the business but are not involved in its day-to-day running.
Limited Liability Partnership – An LLP is a cross between a partnership and a limited company, and has limited liability. It has to be owned by at least two partners.
Private Limited Liability Company – Liability is limited to the value of the shares issued, which means that any debts are debts of company and not the owners. Limited companies must be registered at Companies House and obtain legal documentation including a Memorandum and Articles of Association. Annual accounts must be submitted to Companies House.
Charity – the definition of a Charity is a body or institution set up for objectives which are ‘exclusively charitable’ according to the law of England and Wales. They must aim to meet certain objectives, such as the advancement of education or other purposes beneficial to the community. A charity must register with the Charity Commission if it is set up in England or Wales.