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For a successful business, you need a viable business idea, the skills to make it work and the funding. Discover whether your idea has what it takes.

Forming your business correctly is essential to ensure you are protected and you comply with the rules. Learn how to set up your business.

Advice on protecting your wellbeing, self-confidence and mental health from the pressures of starting and running a business.

Learn why business planning is an essential exercise if your business is to start and grow successfully, attract funding or target new markets.

It is likely you will need funding to start your business unless you have your own money. Discover some of the main sources of start up funding.

Businesses and individuals must account for and pay various taxes. Understand your tax obligations and how to file, account and pay any taxes you owe.

Businesses are required to comply with a wide range of business laws. We introduce the main rules and regulations you must comply with.

Marketing matters. It drives sales and helps promote your brand and products. Discover how to market your business and reach your target customers.

Some businesses need a high street location whilst others can be run from home. Understand the key factors from cost to location, size to security.

Your employees can your biggest asset. They can also be your biggest challenge. We explain how to recruitment and manage staff successfully.

It is likely your business could not function without some form of IT. Learn how to specify, buy, maintain and secure your business IT.

Few businesses manage the leap from start up to high-growth business. Learn what it takes to scale up and take your business to the next level.

Should you trade as a partnership or limited company?

If you’re planning to start a business, you will need to decide how you want to trade, whether it’s as a limited company, partnership or sole trader. This will largely depend on how many people are involved, the type of business and how you want it to be run

If you’re going into business alone, becoming a sole trader may be the best option. However, if you want to work with and employ a number of people, you can trade as a partnership or a limited company. But which one is best?

A partnership has a very different structure from a limited company in terms of accounts and liability. There are, though, advantages and disadvantages to both, so you need to know all the risks involved before you dive in.

Key features of a partnership

A partnership is similar to a sole trader business, but a partnership involves two or more people who own the business and share the responsibility. This can have its upsides and downsides, but the main points are:

Advantages of trading as a partnership

  • Tax efficiency. With a partnership, you draw earnings, as opposed to receiving a salary through PAYE. You also don’t need to make National Insurance contributions.
  • There’s no need to register at Companies House or file a confirmation statement. However, it’s advisable to draw up a partnership agreement, which explains the business structure, legalities and each partner’s responsibilities.

Disadvantages of trading as a partnership

  • Joint and several liability. This is quite a big disadvantage, but this can be overlooked at the beginning (no one wants to think about what would happen if their business fails). Each partner is liable to the entire debt of the business.
  • Regardless of each partner’s financial status, if one cannot afford to pay any debt back and goes bankrupt, the entire debt will be left to the remaining partner(s). Worst-case scenario, a partner may have to sell the family home to pay the partnership’s debt.
  • If a partner leaves a partnership business (eg retires, changes job/career), they may still be liable if the business becomes insolvent later on. Some partners who leave a partnership choose to continue investing, because they often get a good return over the years. However, they could be brought back into legal dispute and liability clauses if the business becomes insolvent.
  • Shared responsibility. This can lead to disputes and fall-outs. There’s the old saying: “A friendship founded on business is a good deal better than a business founded on friendship”.

It is not uncommon for business partners to fail to realise where their liabilities end until it is too late. If a partnership is the preferred type of business, all partners must be aware of what’s at stake and know exactly what they are getting into from the beginning.

What is a Limited Liability Partnership (LLP)?

Limited Liability Partnership is a corporate structure that gives partners limited liability and has similar traits to that of a limited company, while keeping the tradition of a partnership. It gives partners the benefits of a partnership, but allows them to be only partly liable if things were to go wrong.

Key features of a limited company

A limited company is owned by its shareholders (usually the directors) and all profits generated belong to the company. The company debt remains separate from individuals.

Advantages of a limited company

  • Directors of a limited company are not personally responsible for the company’s debt. If the company goes downhill, the directors and shareholders will undoubtedly be upset and worried for the business. But the buck stops there - their own personal circumstances will not be affected (eg their mortgages, savings and other personal investments are safe) unless there has been any wrongful trading. If the authorities can prove the directors have been fraudulent, they will be held personally liable.
  • Work and life at home can be separated financially because setting up a limited company means there will be clear legal boundaries between the two. This in turn can help ensure good balance and wellbeing.

Disadvantages of a limited company

  • A limited company must register and file a confirmation statement at Companies House.
  • Companies must pay corporation tax.
  • There are more director duties and legal responsibilities.
  • Higher accountancy fees.
  • Some creditors might worry that if they are dealing with a limited liability company, they will have less protection against debts.

It’s impossible to tell how well a company may do in the future. If the business is a success, a partnership can be highly beneficial. However, if the business were to fail, would you be prepared to pay off the entire debt and put your own personal finances at stake? Regardless of the kind of business you want to set up or how many people you want to involve, you must consider all the risks (as well as benefits).

Forming and registering a business