Business structures - which should I use?

Having made the decision to be your own boss, it is important to decide the best legal and taxation structure for your enterprise. The structure for you will depend on your personal situation and your future plans. Consider the options available.

We consider the options available to you when starting your own business. There are tax and legal implications which have a bearing on the choice you make. If you are starting, or have recently started a business in the Alton and Petersfield area we, at Sheen Stickland, can help you decide on an appropriate business structure.

Having made the decision to be your own boss, it is important to decide the best legal and taxation structure for your enterprise. The most suitable structure for you will depend on your personal situation and your future plans. The decision you make will have repercussions on the way you are taxed, your exposure to creditors and other matters.

The possible options you have are as follows.

Sole trader
This is the simplest way of trading. There are only a few formalities to trading this way, the most important of which is informing HMRC. You are required to keep business records in order to calculate profits each year and they will form the basis of how you pay your tax and national insurance. Any profits generated in this medium are automatically yours. The business of a sole trader is not legally distinguished from the proprietor’s personal affairs so that if there are any debts, you are legally liable to pay those debts down to your last worldly possession.
Partnership
A partnership is an extension of being a sole trader. Here, a group of two or more people will come together, pool their talents, clients and business contacts so that, collectively, they can build a more successful business than they would individually. The partners will agree to share the joint profits in pre-determined percentages. It is advisable to draw up a Partnership Agreement which sets the rules of how the partners will work together. Partners are taxed in the same way as sole traders, but only on their own share of the partnership profits. As with sole traders, the partners are legally liable to pay the debts of the business. Each partner is ‘jointly and severally’ liable for the partnership debts, so that if certain partners are unable to pay their share of the partnership debts then those debts can fall on the other partners.
Limited company
A limited company is a separate legal entity from its owners. It can trade, own assets and incur liabilities in its own right. Your ownership of the company is recognised by owning shares in that company. If you also work for the company, you are both the owner (shareholder) and an employee of that company. When a company generates profits, they are the company’s property. Should you wish to extract money from the company, you must either pay a dividend to the shareholders, or a salary as an employee. The advantage to you is that you can have a balance of these two to minimise your overall tax and national insurance liability. Companies themselves pay corporation tax on their profits after paying your salary but before your dividend distribution. Effective tax planning requires profits, salary and dividends to be considered together. There are many advantages as well as disadvantages to operating through a limited company. New companies can be purchased in a ready-made form usually referred to as ‘off the shelf’ companies. These types of formation are becoming less frequent, however, as the speed of which companies can now be created takes, on average, 3 hours rather than days. There are additional administrative factors in running a company, such as statutory accounts preparation, company secretarial obligations and PAYE (Pay as You Earn) procedures. A big advantage of owning a limited company is that your personal liability is limited to the nominal share capital you have invested.
Limited liability partnership
A limited liability partnership is legally similar to a company. It is administered like a company in all aspects except its taxation. In this, it is treated like a partnership. Therefore you have the limited liability, administrative and statutory obligations of a company but not the taxation and national insurance flexibility. They are particularly suitable for medium and large-sized partnerships.
Co-operative
A co-operative is a mutual organisation owned by its employees. One example of such an organisation is the John Lewis Partnership. These structures need specialist advice.

How we can help

If you are starting, or have recently started a business in the Alton and Petersfield area we, at Sheen Stickland, will be happy to discuss your plans and the most appropriate business structure with you. The most appropriate structure will depend on a number of factors including consideration of taxation implications, the legal entity, ownership and liability.

Copyright

© 2025 Sheen Stickland. All rights reserved.

powered by totalSOLUTION

We use cookies on this website, you can find more information about cookies here.
Quick links

Contact us | Site map | Accessibility | Disclaimer | Privacy | Help |

Addresses:
Sheen Stickland, 2 Oriel Court, Omega Park, Alton, Hampshire GU34 2YT
Sheen Stickland, The Engine House, 77 Station Road, Petersfield, Hampshire GU32 3FQ

Sheen Stickland is the trading name of Sheen Stickland LLP and Sheen Stickland Audit Ltd

Sheen Stickland LLP is a Limited Liability Partnership Registered in England. Number OC 313253 Reg Off: 2 Oriel Court, Omega Park, Alton, Hampshire, GU34 2YT

Partners: David Sanders, Philip Sharpe, Paula Joyce, Sticklands Ltd

Not all the partners are members of Sheen Stickland LLP. A list of members of Sheen Stickland LLP is available from the Registered Office

Audit & related services are provided by Sheen Stickland Audit Ltd Registered in England. Number 02223334 Reg Off: 2 Oriel Court, Omega Park, Alton, Hampshire, GU34 2YT

Sheen Stickland Audit Ltd is registered to carry on audit work in the UK & Ireland and Sheen Stickland LLP is regulated for a range of investment business activities by the Institute of Chartered Accountants in England & Wales