What legal structure should you use?

There are many different structures to choose from and depending on the nature of your business and your own situation one may be more suitable than another.

The choice you make will affect the tax and national insurance you pay, the records and accounts required, liabilities you may face if the business fails, how you can raise finances and how the business is managed.

The main structures are:
Sole trader - the simplest to set up and operate, but you have unlimited liability for the debt of the business and it is not necessarily the most tax efficient basis for a business.
Partnership - it is relatively straightforward to establish, flexible to operate, but you have unlimited liability for the debt of the business and your fellow partners. Disagreements between partners can cause problems.
Limited liability partnership (LLP) - it has the flexibility of a partnership as opposed to the more rigid structure of a limited company. It does offer limited liability. They are, however, more complex to set up and disagreements between partners can cause problems.
Limited liability company - with a limited company you can restrict your personal financial risk to the extent of funds you introduce and any guarantees you make on behalf of the company. They are relatively easy to establish, but there are more legal responsibilities arising from operating through a limited company. Depending on personal circumstances, it can often be a more tax efficient way of operating.