Not every owner has the same needs and not all of them are prepared to take the same level of liability for their business activities. This is the reason why there are a few different types of business ownership options out there. By learning more about them, you should be able to make the right choice. Of course, it would be even better if you talk to experts from company formation agencies.

The different types of business ownership

Basically, there are three types of business ownership in the United Kingdom – sole trader, partnership, and limited company.

Sole trader

In the recent period, sole trader is becoming a very popular business ownership structure for one reason – the rise of online stores. In order to start a business like this, you must register with HMRC (HM Revenue and Customs) once you start conducting business activities. What’s unique about sole trader as a business ownership structure is that the owner is fully responsible for the debts and legal actions against the business. So, the liability goes on a personal level. As a result of that, the owner can also take the whole profit.

To put in simple words, sole trader is the perfect ownership structure for those who want to start their business quickly and to take full control of the profits and decisions related to their business. The downsides are the facts that this is not an independent business entity and the high level of responsibility.


Here’s another example of a popular business ownership option in the UK. It is mostly used by small businesses. At least two individuals are needed for an ownership structure like this. In most cases, people start partnerships in order to join their experience, skills, knowledge, and assets. They believe that their joint forces can get them closer to business success.

In order to set up a partnership, owners must select a nominated partner and this partner will register the structure with HMRC. Once again, the partners are liable for the obligations, legal actions, and debts related to their business on a personal level. Partnerships are good for dividing labor and they allow better capital investment. However, they are not a separate legal entity and the owners are jointly liable at a personal level.

Limited company

Finally, if you are interested in using a separate entity, then you have to focus on setting up a limited company. Remember that the process of setting up and running a company is more complex which is why most people seek professional help. Besides notifying HMRC for the business, you also have to register the limited company with the help of the Companies House. The owner or the owners of a limited company are not personally financially liable for the debts and legal actions associated with the company. In addition, running a company will definitely enhance your credibility.

When analyzing the different types of business ownership options, focus on the ones that suit your business needs and requirements in the best way.  Consult a financial expert before you make your final decision.

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