Doing business in England: company types vs. other forms of business

Doing business in England sounds attractive in terms of market size, potential, affordability and corporate taxation. But how to do it? We'll help you get your bearings - an overview of UK company types and other options will make your decision easier.

How to do business in the UK?

The business environment in the UK is similar to the Czech one. It includes three basic forms of business:

• sole traders(sole trader or also sole proprietor);
• companies(private or public companies);
• partnerships.

Sole proprietorships are predominant in the UK market. A sole trader is liable for all the liabilities of his business and is liable for all his personal assets without limit.

Partnerships can be both private and public.

• In private companies, the share capital is financed by the owners/partners and they are then liable for the company's liabilities up to the amount of the share capital.
• Unlike private companies, public companies owned by shareholders can be traded on the stock exchange. This makes it easier for them to raise capital for further development while maintaining limited liability.

Partnerships are associations where at least two business partners share profits or losses, but also share liability - whether limited or unlimited. Partnerships can be formed by either natural or legal persons (or a combination of both) and are governed by a mutual agreement.

Types of partnerships in England

There are four types of legal form for companies, including the partnerships already mentioned:

1/ Private limited company (Ltd.)

Ltd. is a private limited company. Similar to our market, it is the most common form of legal entity in the UK.

Doing business as a Ltd. is preferred by small and medium-sized businesses because it combines the advantages of a corporate structure with relative simplicity and flexibility. It allows owners to plan corporate strategy, business model and management of the company in general much more quickly and directly.

Compared to public companies, Ltd. is subject to less regulation by the state and less supervision by regulatory authorities. And should the company need to be sent into liquidation or generate long-term debts, the personal assets of the shareholders remain intact.

Ltd. in the UK exists in two forms:

• Limited by shares - these are classic companies set up to make a profit. Its members are calledshareholders anddirectors and are liable up to the amount of their contribution and the company's share capital.
• Limited by guarantee - they tend to be incorporated as non-profit companies. Their members are calledguarantors anddirectors. They are liable for the company's obligations up to the amount of the deposits they have agreed to make.

The minimum capital requirement for setting up a Ltd. and the minimum amount of a member's contribution starts at a symbolic £1. However, if you put more capital into your company, it will certainly appear more credible.

2/ Public limited company (Plc.)

A plc. on the other hand, is a public limited company. It is a public limited company where the owners/shareholders are liable for liabilities only to the extent of their investment in the company (their personal assets remain separate).

Plc. shareholders must deposit a share capital of £50,000 on registration. They are also subject to much more complex and stringent accounting and reporting requirements and an obligation to audit business activities and results.

If Plc. shares are traded on a stock exchange, virtually anyone in the world can become an owner. While this option makes it easier to raise additional capital, it also carries risks. Every shareholder has the right to participate in the running of the company and to demand a share of its profits (dividend payment).

3/ Limited partnership (LP)

An LP is an association of business partners, whether natural or legal persons or a combination of both. The partners are jointly liable for the obligations of the association and are liable for them without limitation with all their assets.

The terms and conditions of the partnership are regulated by the members in a mutual agreement (deed of partnership), which specifies, among other things, the methods of its management, the rights and obligations of the individual entities and the distribution of profits or coverage of losses. However, profits are taxed by each partner alone.

The advantages of a partnership include shared know-how and better financial opportunities. The disadvantage may be the inconsistent collective decision-making of its members.

4/ Limited liability partnership (LLP)

An LLP combines the advantages of a partnership and a private limited company. Each partner is liable only up to the amount of his contribution and taxes the profits of the partnership only in his tax return. As such, an LLP is not subject to corporation tax.

Unlike an "ordinary" partnership:

• An LLP has its own legal personality and can contract for itself;
• due to limited liability, it provides the members with the benefits of a small company while maintaining the tax advantages.

Other forms of business in England

If you already have a business in the Czech Republic, you can choose alternative ways to enter the UK market:

1/ Foreign branch

A foreign branch, or UK establishment, is not a separate legal entity but a branch of your Czech business. Registration can take much longer than setting up a new Ltd. company in the UK, as you must also provide documents and information to confirm the existence of your Czech company.

The branch does not even operate under the limited liability regime of the shareholders. Your parent company is liable for all its debts and liabilities abroad.

2/ Affiliated subsidiaries

Subsidiaries have the character of a private limited company and are created as new companies with separate legal personality. Alternatively, you can get a pre-incorporated company in England, called a ready-made company - it is already registered with the relevant registry, has paid-up capital and has all licenses and registrations processed.

3/ Joint venture

A joint venture is similar to a business partnership, but is entered into for a specific purpose - for example, to undertake a joint project.

• Partnerships are typically based on long-term cooperation to make a profit.
• In contrast, the members of a joint venture pool their resources to achieve one specific goal, and then the joint venture may dissolve again.

The liability of the members as well as tax and other obligations are handled separately by each partner within its own entity.

We can help you set up a business in England

You may feel that starting a business abroad brings complications in addition to the language barrier. Working with experts will help you avoid them!

We have many years of experience in setting up Ltd. companies in the UK - we will take care of the administration, prepare the necessary documents and take care of all legal requirements. Contact us using the form below to find a solution for your UK business.