Business Type

Before you start your business you will need to decide what legal form of business is best suited to your particular circumstances. There are three main ways that a business can be setup. They are a Sole Trader, a Partnership, and a Limited Company. You can of course change form of your business as it develops and the needs of your business change.

Sole Trader

Advantages: This is the easiest and quickest form of business to setup. You are the boss so you have complete control over how your business is run. Any profits made are yours to use as you wish.

Disadvantages: You are personally liable for any debts that your business incurs. If your business is not successful you end up losing your personal assets such as your house to clear your debts (though you can insure against this).

Partnership

Advantages: A partnership is quite easy to setup, using a solicitor to draw up a partnership agreement.

Disadvantages: You and your partners are personally liable for any debts that your business incurs. So if your partner runs off abroad with all the money, you will be responsible for sorting out the debts of your partnership. If one of the partners resigns or dies, the partnership is ended, and will have to be re-formed if the business is to continue.

Limited Company

Advantages: The main advantage is that you have a limited liability for your company debts.

Disadvantages: It costs more to setup and can take longer for the legal documents to be processed. You may find it difficult to get suppliers to supply you with goods on credit as your limited liability makes you a bad credit risk. This means that you have to pay cash for goods before they are delivered and you can earn the money to pay for them.

Conclusion