There are 4 main types of business structures in the UK and each has various tax and liability implications for owners and shareholders:

• Sole trader – simplest form of business to set up however you are personally responsible for your business’s debts.  You will also need to register for Self Assessment;
• Partnership – simplest way for 2 or more people to run a business together.  You each share the risks, costs, benefits and responsibilities of running a the business;
• Limited liability partnership –  similar to a partnership except that the partner’s liability is limited to the amount of money they invest in the business;
• Limited company – most are limited by shares meaning the shareholders’ responsibilities are limited to the amount paid for the shares.  There are more reporting and management responsibilities.  As a Director, you are legally responsible for your company’s records, accounts and performance.

Of all the choices you make when starting a business, one of the most important is the type of legal business structure you select for your company.  Not only will this decision have an impact on how much you pay in taxes, it will affect the amount of paperwork your business is required to do, the personal liability you face and your ability to raise finance.