Starting up in business
There are five different legal forms of business;
- sole trader
- limited company
- limited liability partnership (LLP)
If an individual wants to work on their own, their choice is either sole trader or limited company. If an individual wants to work with others, the choice is between partnership, limited liability partnership, limited company or cooperative.
Whichever form your business takes, Higgisons has the expertise to support you. Why not give us a call today?
In legal terms, the sole trader operates as an individual. Business finances cannot be separated from personal finances insofar as the sole trader carries unlimited liability and is personally responsible for obligations incurred...read more.
A limited company is a separate entity from the individuals who own it. It has a distinct legal personality. A company can take many forms, including a privately-owned company, a public limited company and a company limited by guarantee.
Companies have a formal constitution set out in the Memorandum and Articles of Association. The Memorandum sets out the framework of the business in a set of clauses, name, registered office, objects (objectives) and so on, and defines the company’s relationship with the outside world. The objectives of the business are, therefore, defined formally, though they may be interpreted in different ways by directors and executives. The Articles are the internal constitution, laying down how directors are elected and removed, rights and duties of shareholders and other internal constitutional matters.
By definition a Partnership is the coming together of two or more individuals for their common good. Like the 'Sole Proprietorship', the Partnership is almost totally exposed to third party actions. Legally, a Partnership can often be formed with no written agreement; however, one would be ill advised not to set-out the rights and obligations of the partners...read more.
Limited Liability Partnership
An LLP is an alternative corporate business vehicle (introduced April 6th 2001) that gives the benefits of limited liability but allows its members the flexibility of organising their internal structure as a traditional partnership.
Any new or existing firm of two or more persons will be able to incorporate as an LLP in England, Scotland or Wales. It is not possible to convert a company to an LLP or vice versa. LLP's are not available to Charities, there must be a view to profit.
LLP's are similar to companies in the respect that they will be required to provide financial information equivalent to that of companies, including the filing of annual accounts. Also they must notify any changes to: The LLP membership; members' names & addresses; the Registered office
Formation and names
Administration and management
A cooperative is a group of people operating through a jointly owned and democratically run organisation. The type of cooperative varies. For example, this could be a group of workers who own the organisation they work for, or consumers who join together to buy more efficiently, or an agricultural cooperative where farmers join forces to strengthen their bargaining power. Cooperatives are underpinned by strong values, such as self-help, democracy, equity. To foster these, most co-operatives adhere to seven principles:
- voluntary and open membership
- democratic member control. Many adhere to a system of one member, one vote
- member economic participation. Members all constribute to the organisation's capital and democratically control its use in the business. Often the capital itself cannot be distributed to individual members and, even on winding up, would be given to charity or put to some community use. Profits may be distributed to members, kept within the business, or used in some other way agreed on by the members
- autonomy and independence. Cooperatives can enter into agreements with other organisations and raise money from external sources, but only on terms which ensure the democratic control of the members is maintained.
- education, training and information. These are provided by the cooperative to its members so they can contribute effectively to its development. The cooperative also has a dury to inform the public about the nature and benefits of cooperation.
- cooperation among the cooperatives ( through local, regional, national and international bodies)
- concern for the community.