When it comes to forming a company, there are a few options available to you. The type of company you choose will be dependent on the nature of the business you intend to carry out, for instance if you intend to own the company alone (a ‘sole’ trader) or if you intend to hire employees or set up a non- profit organisation.
Under a limited company structure, the company is owned by its shareholders and your company and personal finances are kept separate (unlike a sole trader structure). A private limited company cannot offer shares for sale on the stock market, whereas a public limited company can.
Working as a sole trader, you are not required by law to have annual accounts or to file accounts for inspection. However, unlike a company limited by shares where directors and shareholders have limited liability, your personal liability is unlimited.
Limited by Guarantee
A company limited by guarantee is mainly used for non-profit organisations, such as sports associations, students’ unions, charities, membership clubs and non-governmental organisations (NGOs). Rather than share capital and shareholders, a limited by guarantee company has members who act as guarantors.
Limited Liability Partnership(LLP)
An LLP is a partnership with limited liability for its members. It has the flexibility of a partnership and is taxed as partnership, but in other respects it is similar to a private company.
Whilst a limited company and sole trader set up tend to be the most popular options, there are advantages and disadvantages to each.
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