Appropriate Legal Structure

Shaun Angus



A partnership consists of 2-20 people working together.

Being able to share the burden. Partnerships give mutual support, companionship,and someone to share start-up problems.

It can be stressful, lonely and frightening running a business alone.With someone else, you can feel like you are in it together.

Having access to more skills, knowledge and experience. Partnerships provide for a wider skill base, complementary experience and know how. For example, once co-founder may have a technical background and the other financial.

Your partnership will keep all funds and you make your own decsions.


The negative side of a partnership consists of fights occurring regularly, unlimited liability.

Less autonomy; not being able to do your own thing and not always getting your own way.

As a partnership you both have equal responsibility (if 2 people).

Your partnership must work long hours depending on amount of employees.

Sole Trader


You have complete control over your assets and business decisions. It's also relatively easy to wind up or change structure if you grow.

Fewer statutory obligations mean less paperwork - you just need to submit your personal self assessment every single year.

You have less accountancy costs - Because accounting is simpler your accountancy costs will be lower.

The employment status risk lies with the client, not you.


Compared to a Limited Company you will take home less net pay from an equivalent turnover. You are personally liable to pay tax on all income earned.

You may be personally liable if things go wrong. Your own finances and possessions may be at risk.

It can be more difficult to raise funding as it will appear less established and less able to repay.

Some clients look more favourably at Limited Company companies and will not see Sole Traders in the same light.

Private LTD Company


Limited companies offer limited liability to the shareholders as the company is a separate legal identity from the owners. Therefore the shareholders normally have no personal liability beyond the amount paid for their shares. For this reason most new businesses are structured as limited companies.

An element of prestige is created by forming a limited company. The corporate identity often appears more professional, more established, and both consumers and creditors know that they are legally registered and regulated. This leads to the perception that a limited company is more trustworthy than sole traders.

It is usually much easier and more likely to sell a limited company than a sole trade business.

There is an opportunity to raise funds by issuing shares.


There is less privacy than a sole trader. Certain business information must be filed at Companies House and as a result they are available for inspection by members of the public, for example the company's Annual Accounts.

Administrative expenses will be higher than a sole trader to ensure compliance with formalities of company law, such as preparation of board minutes and shareholder resolutions. As well as dealing with the extra returns and administration relating to running a company.

Professional accountancy services are normally required to assist with the preparation and filing of accounts and tax returns.

Why change a legal status?

There are many reasons such as:


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