A person who wishes to engage in some of business activity will need to do so via some form of business structure, with differing business structures providing different advantages and disadvantages. In the UK, four principal business structures can be identified, namely:

 

1. The sole proprietorship

2. The ordinary partnership

3. The limited liability partnership (LLP)

4. The company

Two of these business structures (the LLP and the company) are created via a process called incorporation and are therefore known as incorporated business structures or, as they are referred in their respective statures, as ‘bodies corporate’. The other two structures (the sole proprietorship and the ordinary partnership) are not created via incorporation and so are known as unincorporated business structures.

 

Sole proprietorship

The simplest and most popular business structure is the sole proprietorship. A sole proprietor is simply a single natural person carrying on some form of business activity on his own account. Whilst a sole proprietorship will be carried on by an individual for that individual’s benefit, sole proprietors can take on employees, although the vast majority do not. The key point is that the sole proprietorship is not incorporated, nor does the sole proprietor carry on business in partnership with anyone else.

Sole proprietorships come in two forms:

1. Where the sole proprietor is a professional (e.g. solicitor, accountant), he will be known as a ‘sole practitioner’.

2. Where the sole proprietor is not a professional, he will be known as a ‘sole trader’. Although it is common to refer to all unincorporated single person businesses as sole traders, a sole practitioner is not in fact a sole trader.

Unlike incorporated structures, there is no separation between a sole proprietor and his business, and sole proprietorships do not have corporate personality. Accordingly, the sole proprietor owns all of the assets of the business and is entitled to all the profit that the business generates.

We advise in relation to:

1. Formation and regulation

2. Financing

3. Liability

4. Contractual and commercial disputes

5. Debt recovery

6. Filing obligations

7. Taxes

8. Data protection compliance

9. Taking on staff

10. Insurance

11. Health and safety

12. Transitioning to a limited company

 

Partnership

Section 1(1) of the Partnership Act 1890 defines a partnership as ‘the relation which subsists between persons carrying on a business in common with a view to profit’.

Two or more persons who wish to carry on business together cannot do so as a sole proprietorship for obvious reasons.

We advise in relation to:

1. Partnership formation

2. Partnership dissolution

3. Partnership agreements and disputes

4. Partners’ duties and liabilities

 

Limited liability partnership

With the passing of the Limited Liability Partnerships Act 2000 (LLPA 2000), two or more persons can now form a limited liability partnership (LLP).

For large professional firms (e.g. accountants and solicitors) who may have thousands of partners worldwide, the joint and several liability of the partners meant that, for example, one partner in London could be personally liable for the unlawful acts of a New York ­based partner that he had never met. The largest accountancy firms therefore lobbied the UK government to create a new form of partnership that provided its partners with limited liability similar to that enjoyed by the members of limited companies. The result was the LLPA 2000.

We advise in relation to:

1. Setting up an LLP and members agreements

2. Explaining the rights and obligations owed under LLP agreements 

3. Advising on the appointment of LLP members

4. Handling performance issues involving LLP members

5. Exits, retirements and expulsion from LLPs

6. Regulatory advice and FCA compliance

7. Whistleblowing and unlawful discrimination claims 

8. Privacy disputes, data protection and subject access requests

9. Restrictive covenants and team moves from LLPs or partnerships

10. Disputes and arbitrations involving LLPs and partnerships

Company

 

Public and private companies

When creating a company, the promoters are required to state whether the company is to be registered as a private company or as a public company. A public company is a company limited by shares, or limited by guarantee and having a share capital, whose certificate of incorporation states that it is a public company (CA 2006, s 4(2)). A private company is simply defined as any company that is not a public company (CA 2006, s 4(1)).

 

Limited and unlimited companies

The terms ‘limited’ and ‘unlimited’ do not actually refer to the company itself, but to the liability of its members. As noted, the liability of the members of a public company must be limited (CA 2006, s 4(2)). Where the promoters decide to form a private company, they will need to decide whether the liability of the company’s members will be limited or unlimited.

We advise in relation:

1. Director’s duties and conflicts of interest

2. Preparing for and running board and general meetings

3. Drafting articles of association

4. Constitutional document reviews

5. Shareholder consents and voting rights

6. Share capital matters including allotments

7. Compliance with the Companies Act 2006

8. Removal of directors

9. Companies House filing requirements