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Sole trader

General partnership

Limited liability partnership

Limited company

Definition
 
A single person carrying out a business and owning all assets of the business personally.
 
Two or more people or companies (the Partners) carrying on a business together.
 
A body corporate with unlimited capacity formed by at least two people (the Members). Has elements of both a company and a partnership.
 
A body corporate formed by one or more persons (known as shareholders). It may be public or private and limited by shares or by guarantee.
 
Liability of owners of the business
 
Unlimited personal liability for all the debts and other obligations of the business.
 
Partners are jointly liable for the debts and obligations of the partnership business and are also jointly liable for the wrongful acts or omissions of their fellow partners.
 
Except in certain circumstances (e.g. if personal guarantees are given), members' liability is generally limited to the amount they have contributed or agreed to contribute to the LLP.
 
Except in certain circumstances (e.g. if personal guarantees are given) shareholders' liability is limited. For a company limited by shares, this is to the amount remaining unpaid on their shares.
Number of owners/key participants
 
Maximum of one person.
 
Minimum of two persons, but no statutory maximum.
 
Minimum of two persons at least two of whom
are designated members but no statutory maximum.
Minimum of one person, but no statutory maximum.

A private company must also have at least one director.

Assets and contracts

Assets
 
A sole trader must hold assets of the business in his own name.
 
Partners must hold the partnership assets in their own names.
 
An LLP is a separate body and can hold assets in its own name.
 
A Company is a separate body and can hold assets in its own name.
 
Contracts
 
A sole trader must enter into business contracts in his own name.
 
Partners must contract in their own name as agents for the partnership business.
 
LLP can contract in its own name, and sue and be sued under such contracts.
 
A company can contract in its own name, and sue and be sued under such contracts.
 

Management and administration

Management
 
Sole trader makes all decisions relating to the business and has full control of management of the business.
 
Generally each partner has the right to participate in the management of the partnership business.
 
Generally each member is entitled to participate in the management of the LLP.
 
Responsibility for managing the company is generally delegated to its directors although certain decisions are reserved to the shareholders.
 
Ongoing filing requirements and costs
 
None.
 
None.
 
Extensive ongoing filing obligations on both an annual and event driven basis, some of which incur expenses
 
Extensive ongoing filing obligations on both an annual and event driven basis, some of which incur expenses
 

Finance and accounts

Accounts
 

A sole trader must:

1. Make an annual self assessment tax return to HMRC.

2. Keep records showing business income and expenses.
 
No statutory obligation to produce annual accounts under PA 1890. However, accounts will be required for business and tax purposes.
 

 

Statutory obligation to produce annual accounts in accordance with specified accounting standards. Accounts must be audited unless an exemption applies.
Must produce annual accounts in accordance with specified accounting standards. Accounts must be audited unless an exemption applies (e.g. the small companies regime).
Methods of financing
 
Personal capital of the sole trader and personal loans provided to sole trader.
 
Money is put into the business by the partners and loans provided to the partners.
 
Capital contributions made by the members (if agreed). Loans / mortgages can be granted to the LLP directly.
 
 
Finance can be raised by issuing shares.Loans / mortgages can be granted to the Company directly.
 
Profits and losses
 
All profits belong to the sole trader, and all losses are borne by the sole trader.
 
Profits of the business belong to the partners. Generally they are entitled to share equally in the capital and profits of the partnership and must contribute equally towards losses.
 
Generally the capital and profits of the LLP are shared equally by its members but there is no general obligation of members to contribute to the losses of the LLP.
 
Generally shareholders receive profits via dividends that are paid by the company or, on a winding up, the distribution of any surplus assets and there is no general obligation of shareholders to contribute to the company's losses.
 
To download the above table as a pdf for easier viewing please click here.