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This is a freeview 'At a glance' guide to trading structures commonly used in the UK.

At a glance

When you start a business you must operate through a trading structure or 'vehicle'. Three types of structure are commonly used in the UK:

There are different variations of partnerships:

There are different types of company:

Business vehicles can also combine to operate together as joint ventures, partnerships, companies and groups of different combinations of these.

Brexit

From 1 January 2021, it is no longer possible to form entities within European regulations.

There were two alternative vehicles that could previously be formed in the UK for activities within the EU up to 31 December 2021:

Businesses who want to trade from Europe using entities which conform to the EU regulations will need to form suitable trading vehicles in the state of their choice.

If you start a business in any other country than the UK you will find a range of additional trading vehicles. These may be similar to those used in the UK, but different legal principles will apply. It is recommended to appoint a local adviser to set up your business as it cannot be done remotely.

Overview and FAQs

Trading vehicles (UK)

The sole trader

A sole trade consists of one self-employed person, running a business on their own account. 

Key features:

The partnership

A partnership is defined in law as two or more persons carrying on in business with a view to profit. A person may be an individual or any other entity such as another partnership, a company or trustees. There are different forms of partnership and they are governed by different partnership acts. 

Certain persons are not able to form partnerships these are:

Property partnerships

Two or more persons who hold a joint or common interest in land are not, according to the Partnership Act, in legal partnership, even though they may split the profits generated by their land or buildings. For tax, each is assessed on their own share. No partnership tax return is required for a property business.

By concession, a trading partnership that also has insubstantial income from land and property will still be assessed as if all its profits are trading profits.

Partnerships are relationships and all relationships may go wrong. Create a partnership agreement to determine (the following list is an absolute minimum):

There are four different types of partnership:

The conventional partnership

This is governed by the 1890 Partnership Act. Many of the key features of this form of partnership are similar to those for a sole trader.

There are some significant differences.

The Limited Liability Partnership (LLP)

This trading vehicle is a sort of a cross between a conventional partnership and a company. It has the best features of each. LLPs are governed by the 2000 Limited Liability Partnership Act and the 2006 Companies Act.

Key features

The limited partnership

Key features

A Scottish Limited Partnership (SLP)

SLPs are, like limited partnerships, popular for structures for investment funds.

Key Features

See Partnerships: What's new 2021-2022

The limited company

There are two main forms of company:

A private company can be unlimited or limited by shares or guarantee. 

Unlimited companies and companies which are limited by guarantee tend to be used for activities that have little or no commercial risk or are run as non-profit making or charitable companies.

Company limited by shares

Key features

As shareholders and officeholders may fall out, it is essential to draw up:

Public company (PLC)

A public company or PLC is set up in a similar way to a limited company, except that it is permitted to apply for listing on a recognised stock exchange and to offer its shares to the public to raise finance.

Key features

Joint Venture (JV)

A JV is an arrangement made between two or more parties to work together. It will typically be set up as a company (referred to as a joint venture company (JVC) or as a partnership (generally using an LLP).

Key features

European trading vehicles

It is no longer possible to form these vehicles, post Brexit, from 1 January 2021.

European Economic Interest Grouping (EEIG)

The EEIG is a joint venture vehicle. It is formed in one member state for the use of different European Union (EU) legal entities and can operate within the EU.

Key features

Societas Europaea (SE)

An SE is an EU public limited company. It must have a minimum subscribed amount of EUR 120,000.

A UK PLC could previously convert into an SE.


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