A Limited Company is ‘limited' because liability for any debts does not include any personal wealth or assets owned by the company director(s). It is restricted to the money and assets owned by the company.

Setting up a Limited Company is a little complicated. You must register at Companies House and ensure that you have named your directors and allocated shares.

Directors are treated as employees of the company, and all profits belong to the company not to the directors.

Every Limited Company must pay corporation tax to HMRC every year and produce a set of accounts (these will be visible to the public). Because the law and paperwork are more complex for a Limited Company than Sole Trader, an accountant is very useful.

Similar to a Sole Trader, but a Partnership must contain at least two partners. A Partnership Agreement is drawn up, which sets out how ownership, profits, and liabilities of the business are shared. Each partner registers as self-employed and takes care of their own tax and National Insurance. All partners are jointly responsible for any business debts and their personal wealth and assets could be at risk.

This structure is similar to ordinary partnerships but as the name implies you would have limited liability (What does 'limited liability' mean? | unbiased.co.uk) (like a Limited Company). Each partner in an LLP registers as self-employed and submits a separate tax return. Just like a limited company you need to be registered at Companies House (Companies House - GOV.UK (www.gov.uk).

Sole Trader means self-employed (but not in the form of a limited company or similar entity). You can employ staff, make all business decisions alone, and take all profits.

A Sole Trader is liable personally for all debts. That means personal assets and wealth can be used to settle any debts accrued in the course of doing business.

You are responsible for paying tax and National Insurance for yourself and any staff every year via Self Assessment at HMRC. So be sure to keep all receipts and records of sales and expenses. Find out more at (Getting to grips with tax | Business Talk | TSB Bank).