There are a number of ways to run a business Sole Trader, Partnership, Limited Company, Limited Liability Partnership and Plc (Public Limited Company). I assuming you are not dealing with the bookkeeping for a Public Limited Company whose shares are traded on a recognised stock exchange such as London Stock Exchange.
Samples of the accounts for Sole trader, Partnership and limited companies are available using the buttons below
The samples above will give you a better understanding of the format and information in each of the different business entities accounts.
The table below shows a comparison of the three main business entities you may deal with (Sole Trader, Partnership and Limited Company)
|Sole Trader||Partnership||Limited Company|
|Limited Liability Status||None the owner is liable for all liabilities||None partners liable for partnership liabilities||Not liable for company debts as long as company trades in line with company law|
|Car Expenses||Business use is paid for by the business and is usually tax allowable||Business use is paid for by the business and is usually tax allowable||Either the car is owned by the company and all expenses are paid for by company and the user of the car will company car tax rates or paid personally and claim mileage allowance from the company|
|Tax||Income Tax on income at basic rate, plus class 4 national insurance, plus class 2 national insurance||Income Tax on income at basic rate, plus class 4 national insurance, plus class 2 national insurance||Corporation tax for the company to pay. The directors will pay income tax on income derived from the business. Shareholders can possibly receive dividends|
|Drawing money from the business||Money in business belongs to the business owner and can be withdrawn at any time||Money in partnership belongs to partners and can be withdrawn at any time||Money belongs to company and you need to draw a wage and/or dividend to withdraw the money|
|Accounts||Accounts are private record||Accounts are private record||Accounts are public record with companies house and anyone can obtain a copy.|
|Fees||Accountancy fees are generally cheaper||Accountancy fees are generally cheaper||Accountancy fees are generally higher than partnership also there is a filing fee for filing the annual return at companies house which is a legal requirement|
|Profile to third parties||Easy to form and can be seen as smaller entities||Easy to form and can be seen as smaller entities||Generally have better profile as seeming to be bigger more established businesses|
Liability for Debts within businesses
Sole Traders are personally liable for the business debts and if the business fails they will have to settle them.
In Partnerships, the partners are personally liable for the business debts and if the business fails they will have to settle them.
Limited Companies have Limited Liability status this means creditors can only claim against the company assets for recovery of debts. The shareholders liability is limited to the amount of investment they have in the company (i.e. the value of the shares). Creditors can take legal action against the officers of the company if they feel they haven’t traded fairly or in line with company law.
Limited Liability Partnerships have Limited Liability status this means creditors can only claim against the company assets for recovery of debts. The partner’s liability is limited to the amount of investment they have in the company.