How To Choose a Corporate Structure for Your Company

Choosing a Corporate Structure Workshop

Starting your own venture can be extremely daunting with lots of new things to consider, such as choosing a corporate structure.

Tree Shepherd in conjunction with Queen Mary University and Q Legal are pleased to announce that we will be running a free workshop on Tuesday 29th March 2022 via Zoom with a Q&A session to help you understand what might seem like a very complicated set of choices. Register for the workshop.

We’ve pulled together the basics for you.

First things first, you need to think about the aims of your company. Clarifying this will help you to figure out which structure is the best match for you. Something to keep in mind though that this doesn’t have to be set in stone, it isn’t unusual for businesses to change their corporate structure as they grow.

So, what are your choices?

Sole Trader

As a sole trader you run your own business as an individual and are self-employed; there is no legal difference between the owner of the business and the business.

  • You fund the business using your own money – you take home all the profits, after tax and national insurance.
  • You get infinite control over business decisions and profits.
  • You are solely responsible for any legal issues that befall the business

A few examples of typical sole traders are freelance writers, electricians, designers, nail technicians and make-up artists- but really the list is endless.

Partnerships

This is very similar to a sole trader except you and your partner share responsibility of the business. There are two different types of partnerships you can undertake:

General (which is more like being a sole trader) or Limited.

  • A general partnership where all partners shoulder the responsibility for debt, profits, and legal issues equally, and don’t fall under a separate business entity.
  • A limited partnership comes into play when you decide you want to have different levels of responsibility within the business.

Limited Company

The main feature is that it is a separate legal entity to the owner/s of that business and the company can have legal action taken against it. The finances are separate from the owner/s, and the company is enabled to hold assets (like Property or expensive equipment).

There are three types of limited company:

  • Private Company Limited by Shares – the ownership of the business is split up into shares which are then given to ‘shareholders’
  • Public Limited Company- Ownership is split up into shares, like a Private Company Limited by Shares but they can offer their shares for purchase to the public.
  • Private Company Limited by Guarantee- Often used for charities and non-profit organisations. The business doesn’t offer shares, it instead is made up of selected guarantors who promise to pay a certain fixed amount towards debts, if the company has any.

Charity:

There are a range of different structures that can be used for charitable organisations and you can make the choice dependent on your circumstances.

  • Unincorporated Association, which is a membership organisation. This means the organisation can be run in any way the members would like it to be run. Because it is unincorporated, it means the organisation can not enter contracts or hold assets/property.
  • Charitable Trusts. These are run by a smaller group of members known as trustees. These trustees are appointed, and there is no public membership. With this kind of charity, if there is an income of more than £5,000, it must be registered with the Charity Commission.
  • Charitable Incorporated Organisation (CIO). Similar to Charitable Trusts, CIOs must be registered with the Charity Commission. However, CIOs do not need to be registered with Companies House, which means less red tape to set up.

Community interest companies  (CICs)

These are a special form of non-charitable company which exists to benefit a community or with a view to pursuing a social purpose. CICs guarantee profits and their assets through an ‘asset lock’, which allows them to secure their profits and assets for the community they want to help.

  • PLC by guarantee
  • PLC

Which one you chose will need to be based on individual circumstances.

If you would like even more information about choosing the best corporate structure for you, then you might be very interested in our online workshop on corporate structure, in conjunction with Queen Mary University and Q Legal.

Register for the workshop, and for further information on the event, contact us.