Sole trader, partnership or limited company?
A free chooser that narrows down the UK business structures from three answers (how many owners, whether you want limited liability, how much admin you want) and compares a sole trader, a partnership, a limited company and a limited liability partnership. General information from GOV.UK, not advice on which structure is right for you, and no tax comparison.
The key differences
A sole trader is one person, personally responsible for all of the debts of the business, paying Income Tax and National Insurance on profits through Self Assessment, with nothing to file at Companies House.
In a partnership the partners personally share responsibility for the business, each partner pays tax on their share of the profits, and the nominated partner sends the partnership tax return.
A limited company is legally separate from its owners, whose liability is limited to the value of their investment. It is registered at Companies House before it trades, pays Corporation Tax on its profits, and files annual accounts and a confirmation statement at Companies House.
An LLP has two or more members, at least two of them designated members. Members are not personally liable for debts the business cannot pay, each member pays tax on their share of the profits, and the LLP files accounts and a confirmation statement at Companies House.
Common questions
Which structure pays the least tax?
It depends on your profits, how you take money out and your other income, so the page does not compare tax figures.
Can one person set up a limited company?
Yes. A limited company needs at least one director and at least one shareholder, and the shareholder can be a director.