It is a legal requirement in the UK to choose a business structure.
This is what defines the business; how it is run; who holds which responsibilities for it; how you will draw your profit from it; how investments are made and finally which taxes must be paid and how paperwork must be filled out.
There are three main types of business structures in the UK:
1. Sole Trader – a business set up and run by one individual, who makes all of the decisions for the business, is legally financially accountable for the business and keeps all of the profit for themselves. An example of this type of business may be the owner of your local corner shop, driving instructor or accountant service.
2. Partnership – a business set up by two or more individuals together, who make all decisions together, share their profits and depending on what type of partner they are, they are either fully responsible for the business debts and assets or have limited liability.
3. Limited company - a business that can have one or more owners, known as shareholders and is considered a separate entity to its owners. This means that the owners are only liable for the amount of money they invested in the company and their personal possessions are not at risk should the business go into debt. There are two types of limited companies: private and limited. Public (plc), being where the shareholders can trade shares publically and raise capital and Private (ltd) where they cannot.
Other types of Ownership
Charities and Social Enterprises
A charity is a type of organisation whose main aim is not to make a profit, but rather to make a difference in the community.
These types of organisations survive on donations from individuals to survive.
Examples include you local homeless shelter and shops that sell second hand goods to raise money for disadvantaged members of community, such as those with learning disabilities.
Recently there’s been a rise of people deciding to pursue social entrepreneurship.
This is a business that has both social and commercial goals, but it concentrates on making money for the purpose of sustaining the work it does in the community. A further explanation can be found here: Social Enterprise