A sole trader is an organisation, which is owned by one person. The assets and liabilities of the owner and those of the business are the same. There are no legal or tax distinctions between the owner and business.

This type of business is straightforward to set up and dissolve. It requires the minimal legal requirements and costs. The owner can make all the decisions and can retain all the profits. He owns all the assets of the business.

The owner can draw or invest funds into or out of the business, as he deems necessary.

Business losses can be offset against other income, including claw back of past pay as you earn (PAYE). As the sole trader is self-employed, he is able to defer Income Tax and reduce his National Insurance contributions. The owner's personal assets can be transferred to a spouse (or any other r

A LTD company can not sell shares or debentures to the public. Has to publish accounts but gets partial exemption from publishing the full accounts, if they are bellow an upper limit. The company secretary is not required to be qualified or experienced, so there may be a lack of knowledge. Share holders can not easily sell shares due to the lack of a market and Articles of association restrictions on transfer.

This is easy to set up and dissolve. There are no legal requirements to audit the accounts. No public access to the accounts ensures confidentiality. Any business losses can be offset against other income. Can be converted to a limited company at a later stage. Benefits of self-employment for income tax and National Insurance. Can attract more capital by admitting new partners, however, each partner has the right to veto the introduction of the new partner. Can get credit easily because supplies are not at risk as it is the partners who are taking the risks. A partnership can sue (and be sued) in its own name even though it is not an artificial person. Can change s19 of the Partnership Act 1890, but all partners must agree (s24 of the Partnership Act 1890). Can change provision of the 1890 Act e.g. s24 - profit and losses shared equally, but partners may provide for a different share (e.g. ¾: ¼ profit liability) in their agreement. If no evidence of split, their split will be equal. Every partner has legal access to inspect and copy firms books s24 (9) Partnerships Act 1890. Differing salaries may be given to partners before surplus profit is split. No doctrine of ultra vires and partnership may engage in any lawful activity as the partners' see fit. Able to access knowledge and experience of the partners.

Limited to maximum of 20 people by Companies Act 1985, some professions are exempt and can have partnerships of unlimited size (e.g. solicitors, accountants, estate agents, stock brokers). Partnerships are jointly and severally liable for debts. Liability extends to private assets/personal fortune. Bankruptcy of partnership equals bankruptcy of all partners (excluding limited partners under the Limited Partners Act 1907). If a partner dies, his estate may still be liable for the businesses debts. Unless specific continuation provisions are made in the agreement, death, bankruptcy or retirement will dissolve the partnership. Less flexibility than a limited company, in transferring ownership. High level of trust required. Whether drawn or not, the profits are taxed as income. Self-employed national insurance entitlements have less benefits. Tax relief on pension contributions is restricted. Partners can be sued individually, or together by a creditor that has not been paid. However remaining

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Approximate Pages = 7 (250 words per page double spaced)