Types of Business Structures in the UK: A Complete Guide
- Published: 22 December 2025
- 9 min read
- Starting a Company
Ruth Dsouza
Author
Ruth Dsouza Prabhu is a content developer who specialises in crafting clear, compelling narratives from complex ideas. With expertise in marketing communications and lifestyle writing, she simplifies business concepts for a wide audience. Her writing blends strategy, storytelling, and thought leadership, always with a focus on clarity, credibility, and meaningful impact.
Mosan Ali
Reviewer
Mosan Ali is our Accounting Manager based in the UK and has a wealth of knowledge of UK GAAP, VAT, and PAYE. With 12 years of experience crunching numbers and ensuring compliance, he keeps our financial reporting ship-shape. Think of Mosan as our blog's accounting guru. He carefully reviews our UK-focused content, ensuring it's accurate, up-to-date, and packed with helpful tips for UK businesses. Get your taxes right from day one with our informative blog posts.
Choosing the right business structure is one of the most important decisions for UK entrepreneurs, especially given the various types of business ownership available. The structure you select affects your personal liability, tax obligations, start-up flexibility, and how your company's operations will be managed as you grow.
Key Takeaways
- The UK has four main business structures: sole trader, partnership, limited company, and limited liability partnership (LLP)
- Each structure differs significantly in liability protection, tax obligations, and administrative requirements
- Limited companies and LLPs offer limited liability protection, while sole traders and partnerships involve unlimited personal liability
What Is a Company Structure
A company structure is the legal framework that defines your business operations and how it pays tax and handles liability. Your choice of business entity determines whether you’re personally responsible for business debts or if the business and owner are legally separate entities.
Different business structures create distinct legal relationships between business owners and their companies. Some structures, like limited companies, function as a separate legal entity from their owners, whilst others, like sole traders, have no legal distinction between the person and the business.
The total UK company register size reached 5,427,787 as of 31 March 2025 (up 1.4% from end of FYE 2024) according to Companies House. Private limited companies remain predominant, consisting of more than 95% of corporate bodies on the register.
Main Types of Business Structures in the UK
Sole trader
A sole trader is the simplest structure where one person owns and operates the entire business as the sole owner and sole proprietor. As a sole trader, you have full control over company decisions and operate as a self-employed individual, but you’re personally liable for all business debts and must pay tax on profits.
Setting up as a sole owner or sole proprietor involves minimal paperwork and low start-up costs - you simply register for Self Assessment with HMRC and begin trading. As a self-employed individual, you'll pay tax on income and national insurance contributions through your personal tax returns, with no legal distinction between personal assets and business assets.
Advantages:
- Complete control over business decisions
- Simple setup with minimal administrative requirements
- No corporate tax obligations
- Flexible structure with easy closure options
Disadvantages:
- Unlimited liability for business debts
- Harder to raise funds for expansion
- Must pay taxes on all business profits
- Limited professional credibility compared to limited companies
You must register for VAT if your taxable turnover exceeds £ 90,000 in any 12-month period, and Self Assessment registration must be completed by 5 October following the end of the tax year you started trading.
General Partnership
A general partnership is a formal UK business partnership structure where two or more people share business ownership and management. All partners have unlimited liability, meaning each is personally responsible for the business’s debts and obligations.
Partners share all the profits, losses, and decision-making according to an agreement, which is highly recommended to clarify roles and profit distribution.
Each partner registers for Self Assessment and files individual tax returns based on their share of profits. The business partnership registers with HMRC and files an annual partnership tax return, managed by a nominated partner who submits it by the 31 January deadline.
The term "business partnership" is broader and includes various types of businesses like limited partnerships and limited liability partnerships, but the general partnership remains the most common for small businesses seeking a simple, flexible structure with shared management.
Key points:
- Unlimited tax liability for all partners
- Shared management and business risks
- Profit distribution per the partnership agreement
- Individual and partnership tax filings required
Even though a written partnership agreement is not legally required, having one can prevent misunderstandings and protect all partners by clearly defining the partnership’s operations and each partner’s rights and obligations.
Choose the right company structure with confidence
Unsure which company structure is best for your business? Our team of experienced advisors in the UK is here to guide you through the decision-making process.
Limited company (Private Limited Company)
A limited company, often referred to as a private limited company (Ltd), operates as a separate legal entity and is one of the more formal structures available to founders. This formal business structure provides limited liability protection, meaning shareholders and one or more directors aren’t personally responsible for company debts beyond their financial stake in this type of business.
Private limited companies are taxed on profits and must maintain company records, file annual accounts with Companies House, and follow specific legal responsibilities. Directors in this type of business receive salaries subject to income tax and national insurance, whilst additional profits can be distributed as dividends. Companies may also receive tax breaks depending on profit levels and reinvestment strategy.
Advantages:
- Limited liability protects personal assets from business debts
- Enhanced professional credibility with customers and suppliers
- Tax-efficient structure for retaining profits in the business
- Easier to raise funds and attract investors
Disadvantages:
- More complex administration and compliance requirements
- Public disclosure of financial information through Companies House
- Higher setup and ongoing costs
- Formal procedures required for major business decisions
If you’re planning to raise capital or work with UK-based investors, a private limited company is often the best fit. LTDs are the structure recognised for SEIS and EIS investment schemes, making them naturally more appealing to early-stage investors.
Account Executive
Limited liability partnership (LLP)
A limited liability partnership combines partnership flexibility with limited liability protection. Limited liability partnership members enjoy limited liability for business debts whilst maintaining the tax advantages of flow through taxation, where profits pass through to members who pay taxes on their income rather than the entity paying corporation tax.
LLPs require at least two members and must have designated members responsible for filing requirements with Companies House. Generally speaking, this structure suits professional service businesses like legal, accounting, and consultancy firms seeking liability protection without corporate formality.
Key features:
- Members have limited liability protection like limited company shareholders
- Flow through taxation means no corporate tax obligations
- Flexible business structure for profit sharing and management
- Enhanced credibility compared to general partnerships
Requirements:
- At least two members, with designated members handling statutory obligations
- Annual accounts and confirmation statements filed with Companies House
- Must have a registered office address in the UK
- LLP agreement recommended to govern internal relationships
LLPs must start trading within one year of incorporation or face potential dissolution by Companies House.
Other Business Structures in the UK
Besides the main different types of business structures, there are several less common but officially recognised options that may suit specific business needs or sectors:
- Limited Partnership (LP): This structure includes one or more general partners with unlimited liability and one or more limited partners whose liability is restricted to their investment. Limited partners typically do not participate in day-to-day management.
- Public Limited Company (PLC): A PLC is a type of company that can offer its shares to the public and may be listed on a stock exchange like the London Stock Exchange.
- Community Interest Company (CIC): Designed for social enterprises and not-for-profit organisations, CICs operate to benefit the community rather than private shareholders.
- Charity: Charities are organisations established for charitable purposes, funded primarily through grants and donations rather than trade.
- Credit Unions: Member-owned financial cooperatives that provide savings and loan services to their members.
- Co-operative: A business or organisation democratically owned and controlled by its members, who can be customers, suppliers, or employees.
Choosing the Right Business Structure
Choosing between the various types of businesses requires careful consideration of your liability tolerance, tax efficiency goals, funding requirements, and growth plans. Each structure offers its own advantages depending on your type of business model and long-term objectives.
Key decision factors:
Factor | Sole Trader | General Partnership | Limited Company | LLP |
|---|---|---|---|---|
| Liability | Unlimited | Unlimited | Limited | Limited |
| Tax | Income | Income | Corporation | Income |
| Setup complexity | Very simple | Simple | Moderate | Moderate |
| Ongoing administration | Minimal | Low | High | Moderate |
| Funding options | Limited | Limited | Good | Moderate |
Consider changing your structure as you grow - many successful types of companies start as sole traders before incorporating as limited companies when seeking investment or managing increased financial risk.
For non-resident founders, LTDs and LLPs are the two structures that offer the strongest balance of flexibility and global reach. Whether you need investor-ready protection with an LTD or the tax-transparent efficiency of an LLP, both options give you the advantage of operating under the UK’s internationally recognised corporate framework.
Account Executive
How Osome Can Help
Osome supports UK entrepreneurs with comprehensive business formation services, including company incorporation, registered office address provision, and ongoing compliance management. Our experienced consultants help founders choose the most suitable structure based on their specific industry, growth plans, and risk profile.
We provide end-to-end support for setting up limited companies and LLPs, handling Companies House filings, and ensuring your structure aligns with your tax strategy and operational requirements. Check out our incorporation packages and feel free to reach out if you have any questions!
Summary
The UK’s four main structures — sole trader, partnership, limited company, and LLP — each serve different entrepreneurial needs and risk profiles. Your choice significantly impacts tax obligations, funding options, and legal responsibilities, making it essential to consider long-term goals and seek professional guidance when selecting your structure.
Ruth Dsouza Prabhu is a content developer who specialises in crafting clear, compelling narratives from complex ideas. With expertise in marketing communications and lifestyle writing, she simplifies business concepts for a wide audience. Her writing blends strategy, storytelling, and thought leadership, always with a focus on clarity, credibility, and meaningful impact.
