So what’s all the fuss?

We feel very strongly about the importance of limited liability structures. We have seen scenarios where businesses just seem to ignore the importance of the protection or their advisers do not educate them. Many professional business advisers have limited liability yet they are content for their clients to remain exposed.

What happens if the business loses trade and the debts build up? What happens if a claim is made against the company and the insurers refuse to cover the claim? These things happen and we have seen it time and time again.

The Government encourages investment and encourages proprietors to avoid risking personal liability. By utilising a mixture of the above structures some businesses may be able to save some tax. When it comes to running any business it is vital that the appropriate legal structure is chosen. We are concerned primarily with financial protection for proprietors and highlight some issues below.

Sole Trader

A sole trader business is where the proprietor is self employed. It may be the simplest way of running a business but the proprietor is personally liable for all the liabilities of the business.


When two or more people work in common in business they will generally carry on a partnership business. In such circumstances they should have a partnership agreement otherwise legislation will apply. In our experience many people do not understand the implications of the importance of having a partnership agreement until it is too late. In any event the partners are generally jointly and severally liable for all the liabilities of the partnership.

Partnerships were very common in years gone by but in recent times they have become less attractive. We would generally say they are now the poor relation to Limited Liability Partnerships.

Limited Liability Partnerships (LLPs)

LLPs are halfway houses between partnerships and limited companies. The big advantage of this structure is that the members (partners) can generally avoid personal liability for say the debts of the company, employment claims, public liability and other financial claims against the business. This is so attractive to business proprietors that many established partnerships have transferred to LLP status. The tax treatment is the same as a partnership and the members are still self-employed. The accounts have to be filed at companies house but they will probably be abbreviated so that very little information is given away.

Limited Company

Like LLPs, limited companies give the proprietors the benefit of limited liability meaning that they do not ordinarily expose themselves to any personal liability issues.

In this day and age we think this is such an important consideration that it overrides some of the disadvantages of limited companies. All businesses will generally take risk and that risk is not always insurable. By forming a limited company the proprietors know that they are less likely to risk their own personal wealth.