Forms of practice

[edit] 3 main types

• Sole trader

• Partnerships:

1. traditional
2. limited partnership
3. Limited liability partnership

• Limited company

[edit] Sole Trader

• Trade in own name
• easy setup
• no legal structure (acts to abide by)
• Responsible for yourself so face the risks alone
• High personal risk - personally liable
• do own accounts
• Can cease to exist easily.

[edit] Partnerships:

[edit] Traditional Partnership

• Relation between 2+ people in business with aim for profit.
• governed by 'Partnership act 1890'
• easy 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
• pay tax 2 x p/y
• 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) - often 1 of project partnerships.
• 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
• pay tax 2 x p/y
• 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 CH
• accounts publicly disclosed
• partners not a cost of business unless salaried.
• profit taxed then distributed to partners.
• Pay NI
• pay tax 2 x p/y
• audited

[edit] Limited liability company

• 1 director (employer)
• owner is shareholder. minimum 1 shareholder
• Liability limited to value of share - LOW RISK
• banks/ landlords may seek personal guarantees as liability may be too low.
• Registered at CH
• Public disclosure of accounts
• articles of association + memorandum: forms companies constitution, directors resp, type of business, means shareholders have control over board of directors.
• director is cost of business so taxed on takings.
• profits taxed.
• dividends taxed.

[edit] Deciding Factors

• Risk
• Client perception
• Admin + set up
• Plan for future
• Tax & NI