Choosing the Best Business Structure for Expanding Your Business: A Comprehensive Guide

This article provides a comprehensive guide on the different types of business structures in the UK, including Sole Trader, Partnership, Limited Liability Partnership, and Limited Company. It discusses the advantages and disadvantages of each type and recommends Limited Liability Company as the best option for expanding a business. The article also highlights the legal and financial implications of each business structure and provides relevant references for further reading.

Business Law

Table of Contents
INTRODUCTION ..........................................................................................................................2
MAIN BODY...................................................................................................................................3
CONCLUSION................................................................................................................................7
REFERENCES:...............................................................................................................................7
Books and Journals:....................................................................................................................7
INTRODUCTION
The structure Sam chooses will have momentous connotations on the magnitude of tax he will
pay, the level of his individual liability (should the business degrade), the sum of management
activity involved and even the capability to raise funds and investment. Beginning with the
erroneous set up may bring in a lot of difficulties afterwards and might necessitate varied
proposals to sort them all. That will come at an important expenditure should he need to proceed
to an alternate framework. There exists 4 major kinds of enterprise structures in the UK and
apiece has different taxation and obligational implications for owners and stakeholders. They are
Sole Partnerships, Partnerships, Limited Liability Partnerships and Limited Company. What all

options are available with Sam for extending his business along with the recommendation for the
best will be elaborately discussed under this work.
MAIN BODY
Sam after owning a business of selling electronic parts to native garages for 8 years as a Sole
Trader, as observed from last two years believed that the business is flourishing in terms of
demand and strength of people employed which along with being beneficial for him exposed him
to various administrative difficulties. To cope up with these issues he now is determined to
expand the business. As Sam is not sure of which type of business structure he should opt for
expansion, all the basic types of structures are provided here. The advantages and disadvantages
of each type is mentioned clearly in order to make his decision more rational.
All the companies do not operate in the same way as three business structures be at their disposal
but they should precisely choose the business as it have serious implications over the capital,
investment and return from their business. Every type of business differs in status of the
paperwork , the tax payable by the owner, the manner in which profit is apportioned, and the
personal obligations if the business suffers a failure.
BASIC TYPES OF BUSINESS STRUCTURE IN UK
SOLE TRADER
Sam is operating the business from past 8 years as Sole Trader. Still the detailed analysis of what
it is along with the legal consequences is provided to make him more clear about the
technicalities of it. Most business operate as sole trader as minimal administration and set up is
required. Enrolment at Institution House is not needed although the enterprise owner should
inform HMRC. This form of business is not considered to be a judicial entity in its personal
right, accordingly the proprietor of the business has limitless liability to all debts and jural
actions. Sole Trader may be relieving in terms of requirements and formalities but the liabilities
attached with this kind of structure make it less chosen by the proprietors. Sole Trader is
managed by one person and there exists no legal differentiation between the proprietor and the
company. The liability is unlimited where all the debt payments and taxes are paid by the owner.
For example specialist services provided such as cosmetician, advocates, etc.

Sole trader business concerns are easy to set up and give up but are subject to comparatively a
fewer regulations. The running cost is also low. The owner is liable for conformation day-to-day
fiscal records, but ultimate responsibility lies on the professional accountant to manage annual
records. In sole trader all the business responsibilities are on the sole owner and no one exists to
share the burden as well. In most cases no specific time is fixed for the work and menial holidays
exist.
The advantage of sole trader is that no registration fees is there. Whole control is in one person
only and all the profits go to single owner (Markey,McIvor,O’Brien, Wright,2021). The chief
disadvantage is that enterprise and private funds are not legally separate. This means that, if the
business has indebtedness or is sued, any obligation will be met with personal money. Exposing
the owner to more private risk than other business structures it usually is not considered apt for
high-cost start-up. It is a plain structure, t with a flock of personal danger.
PARTNERSHIP
Another business option Sam has is of Partnership. Partnership may be referred to a collection of
persons carrying any business with common object of Profit incurring individual liability for the
firm's obligations. No specific law will apply to partnership as they are usually governed by the
terms set out in written agreement or as agreed orally. But when they are ambiguous or not
specified for any condition then the rules of Partnership Act 1890 will apply.
In partnerships two or more individuals who are partners share the responsibilities, financial
liabilities, responsibility of paying taxes owing to National Insurance Contribution and risks as
they are part of same business. Any another business can also be one of the partner in
partnership. If the partnership agreement does not state otherwise, the gains are divided between
the partners. The partnership must be registered with self assessment with revenue and customs
department and return shall be sent to it by any of the partner nominated. The funds for
partnership can be raised by loans and there may be some partners designated as sleeping
partners who are not involved in day to day business rather just contribute to the capital in
partnership. The records containing expenditure and income of partnership shall be kept up to
date.
The partnerships are flexible and simple type of business with the advantage of having more than
one owner to operate the business. The obligations are shared which means when one of the
partner is sued in partnership, all the partners much share the liability of damages.

LIMITED LIABILITY PARTNERSHIP
A limited partnership (LP) is a judicially certified unit at Companies House. It comprises of two
or more partners being individuals or corporal entities. Two types of partners namely General
Partner and one Limited Partner, are present in Limited partnership distinct in their roles and
responsibilities (Allen,Blackham,2018).
LLP'S are considered to be incorporated entities and are are not treated as legal partnership. The
partners in this type of partnership have limited liability. Here the partners themselves manages
the business unlike other companies where the stakeholders elect the directors for the board. For
managing the business, the constituted board employs people. The partners have seperat
liabilities which means the people are responsible for their own negligence or misconduct only.
A limited liability partnership (LLP) has turned a best-selling form of business arrangement for
many authorized professionals. Now more than 40 states have recognised the structure of LLP,
Texas being the first among them to adopt it. LLP's can be restricted in terms of which specific
professions can have it by the state laws. With varied types of business forms , why to choose an
LLP over other forms of business entities is often wondered (Griggs,McLaren,and Scheibner,
2018).
A main profit of creating an LLP is a equilibrium of administration control with decreased
liability influence. Akin to a generic partnership, an LLP allows worthy parties to create a
commercial enterprise that allows its partners to participate in the business activities. Unlike
general partners, individuals in an LLP usually have some kind of limited potential personal
obligation for the debts, carelessness, or misconduct of other partners in the business
organization. When the partner withdraw from this type of partnership, the additional liability of
DDT is not applicable on them. In other companies, the partners leaving them are required to
pay surcharges and educational cess which can be 15%. thus, the profits in hands of Partners in
LLP can be easily taken from them.
LIMITED COMPANY
In UK Limited company is incorporated with Companies House. It is legally distinct from the
shareholders and directors. With a unique company registration number, it confabulate the status
of being a separate legal entity from the managers and individuals who work under it. The law
governing it is Companies Act and the articles of association. All the returns are filed at

companies house which are available to public under the public register. Even a company with
sole legal shareholder has its separate legal entity and is distinctly separate from the person.
Two types of limited companies are there : private limited companies and public limited
companies. Private companies do not trade in stock exchange and are often small business
whereas public limited companies deal in stock exchanges too (Howse,Watts, McGill,
Rowbotham, Hawe,Kite,Bauman,and Freeman,2022).
These business as are registered are Companies House with their own legal liabilities and
obligations which is not the case with sole traders and partnerships. Control is divided into equal
parts called shares. Shareholder is a person owning one or more than one shares.
Here liability being limited means that the business will be responsible for the liability and debts
and owners or managers are not even responsible for employing people for the business. Only
when owners are elected by the board of directors that they become responsible for company's
day to day working.
The finances are distinct from the liability of owner which makes this type of business a desired
choice. On the failure of business, liabilities are equal only to the value of share which are
owned by the person and not to any other personal financial risk. The tax rate of this type is also
less in comparison to other forms of business as there can be rebate from the income tax on the
profits earned under this form. But the work requires more efficient management and thus settled
appointments like secretary, accountant should necessarily be done.
RECOMMENDATION
Sam should choose Limited Liability Company to expand his business of IOM Resolution. It will
provide marginal personal liabilities which will be beneficial for him. Timely expansion of his
business is necessary for catering the needs of his growing business so that the profits can be
properly managed by him for the development of his business. When the business will be
expanded on Limited Liability Company model, profit generation is also expected to be higher.
More investors are attracted due to limited liability under this type and thus investment capital
will also increase. The legal framework also enriches business with various benefits like
proficient tax designs, etc. the liabilities are limited and the burden are also limited to the face
value of share and business is separate legal entity (Cejnar,Duke,2018).

Adopting this form of business can be a pass-through taxation. The members allowed are also
not limited and Sam will have autonomy of expanding the business by involving numerous
people in it. Members will have flexibility in structuring the company's management. No annual
paperwork is required and the formalities of incorporation are also comparatively less.
Expanding the business will automatically create wider responsibilities, thus this type of business
will not create personal responsibility for business debts and liabilities.
CONCLUSION
Choosing the correct business at the right time is necessary for saving the money on income tax,
profit increasing and credibility building. This can save time make difference between success
and failure of business. Business form is the structure of organising the company in regard to its
jural framework and status. Above are different types of business which can be chosen by the
owners considering various elements for sustainability in market (Li, 2020).
When setting up a business, deciding on an befitting enterprise helps the company to be
recognized legally. A subtle business structure also supply guidelines for how the business
should be incorporated, file taxes, etc as a small business owner.
There are various business construction for every type of small business, all create a contrasting
legal structure, affects individual responsibility (liability) for the business, and consider many
other benefits and disadvantages.
The most basic types of business framework include sole trader, partnerships, limited liability
partnerships (LLP) and limited companies. The consideration of each business framework for
once helped analyse all the available options and then choosing the best. Sam is now advised
with the best and Limited Liability Company will be most appropriate for him suiting best of his
needs of expansion of business for growth.
REFERENCES:
Books and Journals:
Markey, R., McIvor, J., O’Brien, M. and Wright, C.F., 2021. Triggering business responses to
climate policy in Australia. Australian Journal of Management, 46(2), pp.248-271.
Allen, D. and Blackham, A., 2018, June. Confidentiality and Settlement: Uncovering the Hidden
Secrets of the Enforcement of Equality Law in Australia and the UK. In Berkeley

Comparative Equality & Anti-Discrimination Law Study Group 2018 Conference at
Melbourne Law School at the University of Melbourne.
Cejnar, L. and Duke, A., 2018. Competition and fair trading practices in the higher education
sector: A comparative review of the position in the UK and Australia. ECLR: European
Competition Law Review, pp.31-36.
Griggs, L., Cho, G., McLaren, J. and Scheibner, J., 2018. Commercial and Economic Law in
Australia. Kluwer Law International BV.
Howse, E., Watts, C., McGill, B., Kite, J., Rowbotham, S., Hawe, P., Bauman, A. and Freeman,
B., 2022. Sydney's ‘last drinks’ laws: A content analysis of news media coverage of
views and arguments about a preventive health policy. Drug and alcohol review, 41(3),
pp.561-574.
Li, Y.T., 2020. Disharmonious Chinese ethnic business: intergroup stereotypes among Chinese
migrant employees in Australia. Ethnic and Racial Studies, 43(4), pp.732-750.