Forms of practice
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Contents |
[edit] Introduction
There are three main types of practice:
- Sole trader
- Partnerships: traditional, limited partnership, limited liability partnership
- 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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