partnerships and sole traders
A partnership is formed where a business is started and owned by more than one person.
In each case, a legal document called a Partnership Agreement sets out how the partnership is run, covering areas such as:
• How profits are to be shared
• What the partners have to invest into the business
• How decisions are taken
• What happens if a partner wants to leave or dies
The partners between them own all the business assets and owe all business liabilities. Partners, therefore, also have unlimited liability.
However, there is now a fairly new form of partnership in which the partnership is treated as a separate legal entity with its own assets and liabilities. This is known as the limited liability partnership (“LLP”).
Like a company, the LLP is registered at Companies House and must file accounts. The partners continue to control and own the business – but the crucial different is that they are protected by limited liability.
A sole trader is a business that is owned by one person. It may have one or more employees. It is the most common form of ownership in the UK.
The main advantages of setting up as a sole trader are:
Total control of the business by the owner.
Cheap and easy to start up – few forms to fill in and to start trading the sole trader does not need to employ any specialist services, other than setting up a bank account and informing the tax offices.
Keep all the profit – as the owner, all the profit belongs to the sole trader.
Business affairs are private – competitors cannot see what you are earning, so will know less about how the business works and how it succeeds.
The reasons why sole traders are often successful are:
Can offer specialist services to customers – e.g. appliance repair specialists.
Can be sensitive to the needs of customers – since they are closer to the customer and will react more quickly, because they are the decision makers too.
Can cater for the needs of local people – a small business in a
In each case, a legal document called a Partnership Agreement sets out how the partnership is run, covering areas such as:
• How profits are to be shared
• What the partners have to invest into the business
• How decisions are taken
• What happens if a partner wants to leave or dies
The partners between them own all the business assets and owe all business liabilities. Partners, therefore, also have unlimited liability.
However, there is now a fairly new form of partnership in which the partnership is treated as a separate legal entity with its own assets and liabilities. This is known as the limited liability partnership (“LLP”).
Like a company, the LLP is registered at Companies House and must file accounts. The partners continue to control and own the business – but the crucial different is that they are protected by limited liability.
A sole trader is a business that is owned by one person. It may have one or more employees. It is the most common form of ownership in the UK.
The main advantages of setting up as a sole trader are:
Total control of the business by the owner.
Cheap and easy to start up – few forms to fill in and to start trading the sole trader does not need to employ any specialist services, other than setting up a bank account and informing the tax offices.
Keep all the profit – as the owner, all the profit belongs to the sole trader.
Business affairs are private – competitors cannot see what you are earning, so will know less about how the business works and how it succeeds.
The reasons why sole traders are often successful are:
Can offer specialist services to customers – e.g. appliance repair specialists.
Can be sensitive to the needs of customers – since they are closer to the customer and will react more quickly, because they are the decision makers too.
Can cater for the needs of local people – a small business in a