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		Choosing the right business structure   Sole Trader  Partnership  Limited Liability Company   Limited liability company   A limited company is in fact a separate legal entity from the shareholders of the company. It is now possible to incorporate a limited company with only one member but there's still a requirement for two directors. The advantage of a limited liability company as the name suggests means that the liability of the shareholders is limited to the amount if any outstanding on their subscribed shareholdings. This usually does not arise in that the shareholdings are nominal shares of a pound each and usually there are no more than 100 shares issued in a private company. In many cases there may only be two shares issued of a pound each. This means that in the event of a company being liquidated the personal assets of the shareholders are not available to creditors. The disadvantage of a limited liability company is that it is more expensive to create than a partnership or sole trader and there are also many legal requirements for example the holding of company meetings, the appointment of directors and the making of returns to the Companies Registration Office annually. I generally advise people to set up the business by way of partnership or sole trader in the early stages and depending on how the business is developing it possible to incorporate a limited company to carry on the business. It is difficult to convert a limited company back into a partnership or sole trader because this involves the voluntary liquidation of the company and the sharing out of the company assets to the individual shareholders. It is very rare for this to happen. It is also very expensive to convert from a limited company into a sole trader/partnership. It is more usual for businesses to be converted from sole traders/partnerships to companies and this usually happens when the business begins to grow.   The forgoing is a brief summary of the legal formalities in setting up a business. We will over the coming months publish articles on other aspects of setting up a business such as:   a. Premises. Should I lease or buy premises? How does my lease protect me? b. Employment Agreements. How do I deal with my employees? c. Patens, Copyrights, Trademarks and Trade secrets. d. Licences/Permits. e. Finance/Legal requirements. f. The Sale of Goods and Supply of Services Act/Customer Relations.

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