Starting a business in the UK: sole trader, Ltd & LLP

Why structure matters

Your legal structure shapes who is responsible for debts, how profits are taxed, and what you must file each year. Many small businesses start as sole traders for simplicity, then incorporate later if liability or tax planning makes a limited company attractive. Partnerships and LLPs suit shared ownership with different risk profiles.

Sole trader

A sole trader runs a business as an individual. You keep profits after tax but are personally responsible for losses. You typically register for Self Assessment. You must register for VAT if your taxable turnover is over the VAT registration threshold (from 1 April 2024 this is £90,000—confirm the current figure on GOV.UK as it can change).

Companies House: no incorporation—no annual confirmation statement for the business itself.

Ordinary partnership

Two or more people share responsibility and profits. Partners usually register the partnership and for Self Assessment. Liability is typically joint and several—professional advice is important.

Private limited company (Ltd)

A limited company is incorporated at Companies House. It is a separate legal entity; shareholders’ liability is generally limited to their investment. The company pays Corporation Tax on profits; directors may take salary and/or dividends subject to rules.

Companies House: you must file annual accounts and a confirmation statement (and maintain statutory registers). HMRC: Corporation Tax returns, PAYE if you employ staff, and VAT registration if your taxable turnover exceeds the threshold (see GOV.UK for the current amount).

Limited Liability Partnership (LLP)

An LLP combines elements of partnerships and limited liability. It must be registered at Companies House and has filing obligations. Tax treatment for members is specific—accountants often advise LLPs in regulated or professional sectors.

HMRC vs Companies House (simple view)

• HMRC cares about tax: income tax, National Insurance, Corporation Tax, VAT, PAYE, and (where relevant) Making Tax Digital.
• Companies House holds the public record of limited companies and LLPs: incorporation, officers, and certain filings.

Both may apply to the same business if you use a company or LLP.

Related reading

• UK business if you are not a UK resident (overview)
• VAT registration thresholds
• Self Assessment tax returns
• Companies House key filings
• Accounting basics & Making Tax Digital
• MTD for Income Tax (if relevant)
• Cloud accounting software compared
• Official GOV.UK & HMRC links
• Glossary