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Companies and organisations can be set up using different legal and financial structures. The following offers a brief introduction to the most common types of business models that you can start up yourself and their respective distinguishing features:
Limited Liability Companies (LLC) are probably the most widely-used corporate structure. They are business entities in which the owners or stakeholders have limited liability for company losses or incurred debt, i.e. shareholders are only liable up to the amount of capital they have invested in the company and do not risk losing more than they put in.
Public Limited Companies (PLC) are a Limited Liability Companies (LLC) which sell shares to the public.
Sole Proprietorships or Sole Traders are trading entities run by one individual in which there is no legal distinction between the person running the company and the company itself, i.e. the owner, or proprietor, accepts full liability for the company’s profits and, equally, its losses and debts. The sole trader is taxed only on personal income, profits brought into the company minus costs and expenses incurred.
General Partnerships are companies set up by two or more individuals in which all partners accept equal liability and responsibility for the profits, losses or debts of the organisation. Partners are taxed in the same way as sole traders, i.e. on all income made by the company minus costs and expenses incurred.
Limited Liability Partnerships (LLP) share similarities with both Limited Liability Companies and General Partnerships. Partners have limited financial liability up to the value of their investment and are not held accountable for their partners.
Community Interest Companies (CIC) are a relatively new type of company that exist to help social enterprises use their profits and income surpluses for the benefit of the community. They are not charities, nor are they profit-driven companies in the traditional sense. Obviously, high profits are paramount, but they are put back into the community rather than into the pockets of shareholders.
Cooperatives are trading organisations run by groups of people who typically have some sort of alliance to the company, either as consumers of the products or services it provides, or as direct employees.
For a comprehensive breakdown of different UK company structures and more information on starting a business, visit Business Link