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What Type of Business?
Sole Trader
Owned by the sole trader. The owner takes all the decisions and the business information is not available to the public. Therefore, unlike limited companies there are no legal requirements to produce reports for public knowledge.
Unlimited liability, for the company debts. It is NOT a separate entity to the owner. Anyone taking legal action, proceeds against the owner. In other words all the owners asset's are at risk.
Limited Company
A limited company is a separate legal entity, owned by shareholders (minimum one no maximum) and managed by directors. The limited company is chosen as the legal status of a business for a number of reason. The shareholders can only lose the amount of their investment. Shareholders personal assets are not available to pay the company's liabilities. Anyone taking legal action proceeds against the company and not the individual.
More red tape. The statutory accounts are those which are required to be produced under company law, and a copy of these is filed with the Registrar of Companies. Every limited company, whether public or private, is required by law to produce financial statements in accordance with IAS1( International Accounting Standards.) These are available for anyone to inspect if they so wish.
Partnerships
Partnerships are much the same as sole traders regarding legal issues. The partners (between 2-20)own the business. The partners are the business, and as with sole traders, are normally liable for the entire debt of the partnership. A written or oral agreement between the partners should be in place (partnership Act 1890) As with sole traders the business information is private not available to the public. Problems can arise when partnerships break up.
Sole Trader
- Easy to set up
- Money is all yours
- Less red tape
- Less administration
Owned by the sole trader. The owner takes all the decisions and the business information is not available to the public. Therefore, unlike limited companies there are no legal requirements to produce reports for public knowledge.
- Unlimited liability
- Possibly higher tax
Unlimited liability, for the company debts. It is NOT a separate entity to the owner. Anyone taking legal action, proceeds against the owner. In other words all the owners asset's are at risk.
Limited Company
- Limited liability
- Possible tax savings
- Appearance of a large business
A limited company is a separate legal entity, owned by shareholders (minimum one no maximum) and managed by directors. The limited company is chosen as the legal status of a business for a number of reason. The shareholders can only lose the amount of their investment. Shareholders personal assets are not available to pay the company's liabilities. Anyone taking legal action proceeds against the company and not the individual.
- Additional Red Tape
- Restrictions to withdrawing cash
- Transparency
- Company Law
More red tape. The statutory accounts are those which are required to be produced under company law, and a copy of these is filed with the Registrar of Companies. Every limited company, whether public or private, is required by law to produce financial statements in accordance with IAS1( International Accounting Standards.) These are available for anyone to inspect if they so wish.
Partnerships
Partnerships are much the same as sole traders regarding legal issues. The partners (between 2-20)own the business. The partners are the business, and as with sole traders, are normally liable for the entire debt of the partnership. A written or oral agreement between the partners should be in place (partnership Act 1890) As with sole traders the business information is private not available to the public. Problems can arise when partnerships break up.
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