Company Structure

What are the different types of companies structures?

Kalina Kar

Last Update 7 months ago

When starting your new business adventure, you need to know what exactly your company objectives are going to be, where will you work from, and if you plan to employ a staff member. Answers to those questions are important and should be well thought through, as they will define your company structure. 

There are 4 most common business structures in the UK, which are Sole Trader, Partnership, Limited by Shares and Limited by guarantee.

Sole Trader

This business structure is the most basic and simplest of all the structures. If you are a Sole Trader, it means that you are self-employed and working for yourself. You must be registered with HMRC and it is your responsibility to pay your own tax and national insurance by filing your self-assessment Tax Return on a yearly basis. Worth noting is that all the profit is for you to keep, but at the same time, you need to cover all the losses that you will come across from your own pocket as well.

Partnership

To set up a partnership you need at least 2 members, a registered office address, and be registered with Companies House and HMRC. Keep in mind that when you register your LLP with Companies House, your registered office address will be available to view publicly online. Each member is responsible to pay the Income tax for their own share of profits, National Insurance to HMRC, and file a Self-Assessment Tax Return every year. However, any debts, that the company occurs, are not their individual matter. You need to have an LLP Agreement that will state how the company will be run and the responsibilities of each partner.

Limited By Shares

This is the most popular structure in the UK and is set up mainly for profit. You must have at least one shareholder and one director, but you can hold both positions. The shareholder owns the company and the director runs it. The same as LLP you must have a physically registered office address and be registered with Companies House. Also, the director is responsible for registering the company for confirmation tax and VAT, preparation of tax returns and annual accounts, filing confirmation statements, keep the company's records, and report any changes to Companies House. It's a legal requirement to sign Memorandum and Articles of Association by all the members of the company. In a brief, this document confirms the position of each member in the company, individual responsibilities as well as how the company will be run and owned. 

Limited By Guarantee

Non-profit structure. Sports Club or Membership Organisation are usually Limited by Guarantee. All the profit that is generated will be invested back to the company. LBG has guarantors, who agree on a set amount of money to be put towards the company's debt, in case if the company is not able to pay it, meaning there are no shareholders. Same as LTD, to set up LBG you need at least one director and one guarantor and as well you can hold both positions. 

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