What is a business structure?

What does a business structure do?The most common business structures in the United Kingdom are sole proprietorships, partnerships, and limited companies. A sole proprietorship is a business owned and operated by a single individual. A partnership is a business owned by two or more people. A limited company is a business that is registered with Companies House and has limited liability.

Each type of business structure has its own advantages and disadvantages. For example, sole proprietorships are easy to set up and have relatively low start-up costs, but they offer little protection for the owner’s personal assets. Partnerships have some protections for the partners’ personal assets, but they can be difficult to dissolve if there are disagreements among the partners.

Limited companies offer the greatest protection for the owners’ personal assets, but they tend to have higher set-up and compliance costs. Ultimately, the best business structure for a particular company will depend on its specific needs and objectives

What does a business structure do?

A business structure is a legal designation of the type of business entity you operate. The most common types of business structures in the UK are sole traders, limited liability partnerships (LLPs), limited companies and charities. Each type of business structure has its own advantages and disadvantages, so it’s important to choose the right one for your business. For example, sole traders have complete control over their businesses but are also personally liable for all debts and losses.

Limited liability partnerships offer some protection from personal liability but require more paperwork and compliance with regulations. Companies offer limited liability to shareholders but can be more complex to set up and run. Charities are exempt from certain taxes but must comply with strict rules and regulations. Ultimately, the best business structure for your company will depends on a number of factors including the size and scope of your business, your financial situation and your long-term goals.

Types of business structure

In the UK, the main 5 types of business structures uses are :

Sole proprietorship

A sole proprietorship also referred to as a sole trader is a business that is owned and operated by a single individual. Unlike a corporation or partnership, a sole proprietorship is not a legal entity; instead, it is simply an unincorporated business that is owned and operated by an individual. While there are several advantages to operating a sole proprietorship, there are also some disadvantages to consider. One of the biggest advantages of a sole proprietorship is that the owner has complete control over the business.

This can be both good and bad; while the owner has complete control over the business, they are also solely responsible for its debts and liabilities. Another advantage of a sole proprietorship is that it is relatively easy to set up and operate. Unlike a corporation, which must file articles of incorporation with the state, a sole proprietorship can be established simply by obtaining the appropriate licenses and permits. However, this ease of establishment also means that sole proprietorships tend to be less stable than other business structures.

If the owner decides to retire or sell the business, the sole proprietorship will usually be dissolved. Finally, sole proprietorships are often less expensive to operate than other business structures because they do not have to pay corporate taxes. However, this advantage may be offset by the fact


Partnership business in the UK is a great way to get started in business. There are many benefits to starting a partnership, including the ability to pool resources and expertise, as well as the increased flexibility that comes from having multiple partners. In addition, partnership businesses often have an easier time accessing capital than sole proprietorships.

However, there are also some challenges that come with starting a partnership, such as the need to develop a clear partnership agreement and the possibility of disagreements among partners. Nonetheless, for many entrepreneurs, the benefits of starting a partnership business far outweigh the challenges.

Limited company

A limited company is a legal structure used to protect business owners from being personally liable for the debts and obligations of the company. A limited company can be either public or private, and it must have at least one shareholder. The shareholders are only liable for the amount of money they have invested in the company, and they cannot be held responsible for any debts incurred by the company.

This makes a limited company an attractive option for many business owners, as it provides them with a degree of protection from financial risks. There are a number of other benefits to operating as a limited company, including increased credibility with customers and suppliers, and the ability to raise capital through the sale of shares.

However, there are also some disadvantages, such as the complexity of the structure and the need to comply with additional regulations at Companies House. Ultimately, whether or not a limited company is the right choice for a business will depend on its individual circumstances.

Limited liability partnerships

A limited liability partnership (LLP) is a business structure that combines the features of a partnership with the limited liability of a corporation. Like a traditional partnership, an LLP is composed of two or more partners who share profits and losses. However, unlike a traditional partnership, each partner’s liability is limited to their individual investment in the business.

This means that if the LLP incurs debt or is sued, the partners’ personal assets will not be at risk. LLPs are popular among professionals such as lawyers, accountants, and doctors, who often work in small firms where everyone knows and trusts each other. However, this business structure can be advantageous for any type of business that wants to protect its partners from personal liability.

Public limited company

A Public Limited Company (PLC) is a type of limited company that offers shares to the public. They are also required to have their shares traded on a stock exchange. PLCs are larger and more complex than private limited companies. Their shareholders have limited liability, which means they are only liable for the amount of money they invested in the company. PLCs can raise money by issuing new shares and borrowing money. They can also buy other companies or sell parts of the business.

PLCs are regulated by laws, which vary from country to country. The shareholders of a PLC elect a board of directors, who are responsible for the management of the company. The board appoints executive officers, who carry out the day-to-day running of the business. Public limited companies are used by large businesses and multinational corporations. They offer investors a way to share in the profits of successful businesses.

The shares of PLCs are bought and sold on stock exchanges around the world. This makes them easy to buy and sell, and provides a way for people to invest in companies without being involved in their management. PLCs offer investors a higher level of protection than private companies because their financial information is public and they are subject to stricter

Changing your business structure

In the United Kingdom, businesses have the ability to change their structure relatively easily. This is due to the fact that there are a number of different business structures that businesses can choose from. For example, businesses can choose to be sole traders, partnerships, limited companies or cooperatives.

Each of these structures has its own advantages and disadvantages, which means that businesses can choose the structure that best suits their needs. This flexibility is one of the key reasons why the UK is such an attractive destination for businesses.

Business Finance specialist at Invoice funding | + posts

Seasoned professional with a strong passion for the world of business finance. With over twenty years of dedicated experience in the field, my journey into the world of business finance began with a relentless curiosity for understanding the intricate workings of financial systems.

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