Becoming a sole trader is the simplest form of business set-up requiring very little formal structure. All you need to do is keep records and register as self-employed for tax purposes.
A formal partnership means you are going into business with another person and creating a separate legal entity that you both own. You will both be liable for its debts.
A Limited Liability Company (or just Limited Company) is a common structure for running many businesses large and small. This is a legal entity in its own right and may have multiple shareholders. It is required to have at least one Director, a Company Secretary and file annual accounts with Companies House. The word ‘limited’ refers to the personal liability of the shareholders and directors should the company fail – losses are limited to the amount invested.
The easiest way to establish a Limited Company is to buy a pre-formed so called ‘Shelf Company’ from a formation agent. You can always adapt a company to your needs including changing its name, Articles of Association (what it is for) and by modifying the Shareholders’ Agreement.
LIMITED LIABILITY PARTNERSHIP
A Limited Liability Partnership, or LLP, differs from a Company with directors in that the individual partners are not normally responsible for the actions, misconduct or negligence of each other. Additionally, unlike a limited company, the partnership pays no corporation tax. The individual partners are responsible for paying their own tax on earnings made through the LLP.