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Which business structure is the best for you?

Embarking on the entrepreneurial path is a thrilling yet intricate journey, with each decision shaping the trajectory of your business. One of the important choices that entrepreneurs encounter is selecting a business structure that aligns seamlessly with their goals, risk appetite, and operational model.

In this guide, we detail the main business structures, so you can see which one applies the best to you…

Sole Trader

Embraced by just over 50% of small businesses in the UK, the sole trader structure offers simplicity and direct control over all aspects of the business.

Setting up as a sole trader, which is the same as being self-employed, involves operating a business independently, often as a freelancer or contractor, and involves the registration with HMRC and submitting an annual self-assessment tax return. This structure also subjects the individual to income tax instead of corporation tax.

While it allows entrepreneurs to retain all profits post-tax, it also exposes them to unlimited liability, potentially utilising personal assets to cover business debts.


  • Minimal setup procedures and costs.
  • Only an annual self-assessment tax return is required.
  • Complete control over business decisions and operations.
  • Fewer legal and professional regulations.
  • No fees incurred for establishing the business.
  • No cap on earnings or profit.


  • Full liability, introducing more risk
  • Personal assets potentially at risk if the business encounters financial issues
  • May be perceived as less professional compared to a limited company
  • Potential difficulty in raising funds or securing investments due to perceived risks associated with sole traders

Ensuring the seamless management of intertwined personal and business finances is crucial for sole traders. At BK Plus, our expertise in Personal & Corporate Tax Advisory adeptly navigates your business through the tax environment, safeguarding both personal and business assets with strategic financial management and compliant tax planning.


Setting up as a partnership requires two or more individuals, and entails a collective agreement to share the profits, losses, risks, costs, and responsibilities of operating a business.

Often recognised as unincorporated entities, partnerships imply that partners, being self-employed, are personally accountable for the business’s losses or debts, as well as for each other’s negligence or misconduct.


  • Increased ability to raise funds and secure loans with multiple contributors
  • Workload, responsibilities and risks are distributed among partners.
  • Collective decision-making and brainstorming can foster innovative ideas.
  • Financial burdens and operational risks are divided among partners


  • All profits must be divided among partners, potentially leading to disagreements
  • Multiple decision-makers can slow down operational and strategic choices.
  • Partners are personally responsible for business debts and eachothers actions
  • Differences in vision or management style can lead to internal disputes

Limited liability Partnership

A Limited Liability Partnership (LLP) is similar to a Partnership, except that the partner’s liability is limited to the amount of money they invest in the business.

Each member of an LLP is taxed on their own share of the earnings. This means that each of them needs to sign up for Self Assessment with HMRC, submit a tax return every year, and pay Income Tax and National Insurance on their personal income.


  • Members’ personal assets are protected as the LLP is a separate legal entity.
  • Management and profit distribution are determined by a written agreement among members.
  • The LLP can own property, employ staff, enter into contracts, and be accountable.
  • Allows for companies to be members.
  • Can operate with different levels of membership.
  • Registering the LLP prevents others from using the same name.


  • Financial accounts, potentially revealing member income, must be submitted to Companies House.
  • Income is taxed as personal income, which may not always be tax-efficient.
  • Profits cannot be retained in the same way as a company limited by shares.
  • Must have at least two members and dissolution may be necessary if the LLP drops to one member.
  • Historical residential addresses may be part of the public record at Companies House.

Limited Company

Registering as a limited company establishes your business as a separate legal entity, providing a shield for your personal financial and legal liability. The company must have at least one director a registered office in the UK, and issue at least one share upon incorporation.

You’ll also be required to register with Companies House, pay corporation tax, submit annual reports to HMRC and Companies House, and appoint a director or board.

Even solo business owners sometimes choose this structure, appointing themselves as director, to benefit from limited liability and minimised personal risk. The director is tasked with administrative duties, conducting annual audits, and filing yearly company accounts.


  • Shareholders are only liable up to the amount invested, protecting personal assets.
  • Opportunities for strategic tax planning and claiming a wider range of expenses.
  • Often perceived as more trustworthy and stable by suppliers and customers.
  • The company name is protected and cannot be used by others.
  • Possibility to optimise salary and dividends for tax purposes.


  • More expensive to establish.
  • Involves more administrative work and annual filing requirements.
  • Changing the company structure can be complex.
  • Financial records are public.
  • Required to submit various documents and reports to regulatory bodies annually.

We’re your ally in strategic business structure…

Choosing the right business framework is a strategic decision that lays the foundation for your venture’s financial and operational stability. The selected structure should not only facilitate current operations but also be scalable to accommodate future growth and changes.

Start your entrepreneurial journey with confidence, backed by strategic financial structuring and expert guidance. Get in touch with BK Plus, and our team will ensure your venture is not only compliant but also optimally positioned for financial success and growth.

The information provided in this article is intended for general guidance and informational purposes only. It does not constitute legal, financial, or professional advice. While every effort has been made to ensure accuracy, the information may not apply to your specific circumstances and we recommend that you seek professional advice before making any business decisions.

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