Chartered Accountant | Swindon | ACCA qualified | Company Accounts

The first decision required is the form the business should take. There are three main choices.

• Sole Trader
• Partnership
• Incorporated Company

Sole Trader

An individual carrying on a business or profession with a view to profit on his/her own account.

Partnership

The Partnership is defined as "the relationship, which subsists between persons carrying on a business in common with a view to profit." It is not a separate legal entity. There are two types: -
Ordinary Partnership governed by the Partnership Act. Joint and several liability for all the partners.
Limited Partnership governed by the Limited Partnership Act. Liability of a Limited Partner is limited to a pre-determined limit. Ordinary Partners would have joint and several liability.

Incorporated Company

It is usually incorporated by registration. It is a separate legal entity. There are three types of registered company: -

• Unlimited company: It has no restriction on the liability of its members so it is rarely used.
• Company limited by guarantee: The members' liability is limited to the amount of their guarantee. This type of company is generally used for professional and trade associations and charitable purposes.
• Company limited by shares: The members' liability is limited to any amount unpaid on their shares. It is the form used for most business purposes.

Sole Trader OR Limited Company?