Law on the Web

Legal Advice for Start-ups. There are different types of businesses that owners must choose between before embarking upon a business venture. Common business models are sole traders, partnerships and limited companies. You should think carefully about which type of business your business should be as the type of business you choose will have an impact on how you run it and what rules you will need to follow.    

Sole Trader

A sole trader means you are self-employed. You are solely responsible for the business and for paying for any equipment or stock you need, as well as taking care of any debts. As a result of this you are also able to keep all the profits that your business earns. Being a sole trader does not mean you are the only one working in the business, you can hire people to work for you and still remain as a sole trader. 

Business Partnerships

A business partnership is similar to a sole trader but the business is shared amongst two individuals instead of one. A partnership allows two business owners to share the responsibilities of a business without the complications of setting up a limited company.  Setting up a partnership allows each partner to play to their strengths, with one focussing on one aspect of the business, like the financial side, and the other partner focussing on another side, like the front-facing side of the business.

Limited Companies

A limited company is a business that will be an organisation with a number of members involved. If you are a director of a company you will be responsible for making sure it operates efficiently. However, if you are an owner of a limited company you have certain protection that you wouldn’t have as a sole trader. For example, if a business runs up any debts, you as the director can’t be held responsible. If you are running a limited company it also means you have additional taxes to contribute to, such as corporation tax.

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