ABC of Accounting - Deciding on a Business Structure - Part 2


 

In this weeks ABC of Accounting blog we look continue to look at the various types of legal business structures available in the UK and explain the most commonly selected types along with the reasons and benefits why a company makes the choice it does.

Deciding on a Business Structure

In part one of Deciding on a Business Structure we looked into Sole traders and Limited Company structures, today we are looking at Partnerships and Limited Liability Partnerships otherwise known as LLP's.

Partnership A

Partnership by the very nature of the word involves two or more individuals sharing the responsibilities of running the business. They are also personally responsible for any debt or loss that the business may experience and in turn also share the benefits the business may provide. Each partner carries the responsibility not only for themselves but also for their partner for any misconduct within the business.

Start up capital can be spread among the partners so, the more partners there are the more money that can be invested in the company giving you more potential for flexibility and growth. Any profits made by the company would then be shared between the partners based on their investment. Having two or more individuals being responsible for running the business can be a good sounding board for ways to move the business forward. Dividing responsibilities according to the expertise the partners bring to the company brings a level of diversity and spreads the decision making, however, this can also lead to differences of opinions.
A partnership can offer employees the possibility of becoming a partner within the business and this can be a strong incentive for employees to remain with the company and work towards to same goals giving the company a strong a loyal workforce.

Limited Liability Partnership (LLP)

n Limited Liability Partnership known as LLP is very similar to a partnership except that some or all may have a limited liability. So, as in a Partnership whereby you would be responsible for any loss on your partners behalf within a LLP this is limited to the amount of money you or they invest in the business.
An LLP has similarities with a limited company and the responsibilities being documented in the Deed of Partnership which would be drawn up and signed.
Going into business with someone else has its advantages, sharing responsibilities, different strengths and abilities can provide the perfect combination. You often hear stories of business partners, one party being the more sales orientated while the other maybe from a finance background or manufacturing and in turn complimenting each others abilities can make a formidable team along with using each other for decision making and moving the company forward.

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