A sole trader
You must send a Self-Assessment tax return every year, keep records of your business' sales and running costs, and pay income tax on the profits you make. You’ll also need to pay National Insurance and register for VAT if you expect your turnover to be above the current threshold.
For more information, read Operate as a sole trader.
In partnership with others
The nominated partner must send a partnership Self-Assessment tax return every year and all partners must send a Self-Assessment tax return every year. Furthermore, all partners must pay income tax on the profits made and pay National Insurance. If you expect your turnover to be above the current VAT threshold, the partnership must register for VAT.
For more information, read Running a partnership.
A private limited company
The company has ongoing reporting and filing responsibilities in each financial year. For more information, read Filing your confirmation statement, Preparing your annual accounts and tax return and Other filings at Companies House. The company must register for VAT if it expects turnover to be more than the current threshold. Furthermore, directors must send in a Self-Assessment tax return each year and pay tax and National Insurance through the PAYE system if the company pays them a salary.
For more information, read Run a private limited company and Private limited companies.
A limited liability partnership (LLP)
The LLP must send a partnership Self-Assessment form to HMRC each year. All partners must send a Self-Assessment tax return every year, pay income tax on the profits made and pay National Insurance. The LLP must register for VAT if it expects turnover to exceed the current threshold.
For more information, read Running a partnership.
A Scottish limited partnership (Scottish LP)
This is a unique vehicle available only in Scotland. Partners are taxed on their share of partnership income and gains according to their profit-sharing ratios. The tax authorities will investigate the Scottish LP and only tax the profits arising from the partnership's activities in the hands of its partners.
For more information, read Run a business partnership.
Deciding on a business structure
You’ll need to weigh up the advantages and disadvantages of the various possible structures. Consider whether you want your finances to be separate from the business. For example:
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are you willing to spend the extra time it will take to set up a company or LLP and deal with its administration?
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do you mind financial information about your business becoming public if you need to file it at Companies House?
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what about the image of your business; will it seem more professional or established if it’s registered and regulated by Companies House?
Consider tax aspects
Don’t forget that selecting a certain business structure will have different tax implications. Your decision will affect the tax you and your business pay and impact potential tax reliefs and grants. You may find it advantageous and even cost-effective in the long run if you choose to obtain advice from an accountant or professional tax advisor.
For more information, read Choosing your business structure.
