Four Ways to Set up a Business

Whether you are setting up a business for the first time, or you are expanding and want to change things, there are generally four types of vehicle that can be used for a private business.


(Most other form of business vehicle, such as social enterprise, revolve around charity law)

So prospective business owners have to think about a number of things when deciding which business vehicle to utilise.

Three questions they have to ask themselves are:

  • What personal level of risk are they willing to take?
  • How much admin do they want to take on?
  • What do they want other people to think about the business?

How much risk do you want to take?

A Sole Trader is personally liable for the business debts that occur (loans, bills, salaries etc).

Partners in a Partnership are also personally liable for debts of the business, which may also include debts the business has occurred as a result of the actions of other partners.

A Limited Company does give significant (although not total) protection from business debts.

A Limited Liability Partnership also provides significant protection.

How much admin do you want to take on or are you capable of?

Sole Traderships can be called “administration light” as you do not need to report to anyone, although you shoudl still keep internal records.

Partnerships normally require significantly more administration, as the partners need to find a way to work together and report to each other.

A Limited Company or Limited Liability Partnership also includes significant administration, including reporting annual accounts, and all significant ownership changes, to Companies House.

What do you want others to think about your business?

Sometimes it is a matter of perception. If you are a limited company or LLP, then it may seem you are bigger than you actually are. This may impress investors, clients and suppliers.

However sole traderships and partnerships come with an expectation of trust.

Further documents

Regardless of your business structure, there are certain other documents you will also want to consider:

  • Terms and Conditions
  • Employment Contracts
  • Loan documents
  • Shareholder or Partnership Agreements
  • Leases
  • And more

To ensure you get your business set up correctly, or to better improve your existing business, talk to Hewetts Solicitors.

Oliver Kew heads up our commercial law department in our Reading offices and will be able to help you.

Call him on 0118 957 5337 to reserve an appointment.

You may also be interested in our article on the 4 Top Protections for your Business, which you can find here:$205.htm

Published on 09/09/2021

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