Last edited 06 May 2019

Forms of practice

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Contents

[edit] Introduction

There are three main types of practice:

  1. Sole trader
  2. Partnerships: traditional, limited partnership, limited liability partnership
  3. Limited company

[edit] Sole trader

  • Trade in own name
  • Easy setup
  • No legal structure
  • Responsible for yourself so face the risks alone
  • High personal risk - personally liable
  • Can cease to exist easily.

[edit] Partnerships

[edit] Traditional Partnership

  • Relation between 2+ people in business for profit.
  • Governed by 'Partnership act 1890'
  • Easy to setup
  • Not registered with companies house - no public disclosure of accounts
  • Joint & several liability - personally responsible for each others errors
  • Should have 'Partnership agreement'
  • Deed of adherence - signed by incoming partners to agree with partnership agreement.
  • Partners not a cost of business unless salaried.
  • Profit taxed then distributed to partners.
  • Pay NI.
  • Audited.

[edit] Limited partnership

  • 1+ general partner- operates partnership - liable for debts and obligations.
  • 1+ limited partners with capital but no liability as not running firm.
  • Registered at Companies house.
  • No public disclosure of accounts.
  • Often used for SPV ( special purpose vehicle).
  • Should have 'Partnership agreement'
  • Deed of adherence - signed by incoming partners to agree with partnership agreement.
  • Partners not a cost of business unless salaried.
  • profit taxed then distributed to partners.
  • Pay NI.
  • Audited.

[edit] Limited Liability Partnership (LLP)

  • Trade in company name.
  • All partners can participate in management.
  • Partners liability limited to assets in firm - not affected personally.
  • Registered at Companies House.
  • Accounts publicly disclosed.
  • Partners not a cost of business unless salaried.
  • Profit taxed then distributed to partners.
  • Pay NI.
  • Audited

[edit] Limited liability company

  • Directors.
  • Owners are shareholders. minimum 1 shareholder
  • Liability limited to value of shares.
  • Banks/ landlords may seek personal guarantees as liability may be too low.
  • Registered at Companies House.
  • Public disclosure of accounts
  • Articles of association + memorandum: forms companies constitution.
  • Shareholders have control over board of directors.
  • Profits taxed.
  • Dividends taxed.

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