SOLE TRADER

Setting up in business as a sole trader is quick and easy and involves little of the form-filling associated with starting and running a limited company. Sole traders make their own business decisions and don't have to answer to anyone else. Sole traders are personally responsible for any losses the business makes. This means your own possessions -including your home-could be at risk if you can't pay your debts. And you may also find it difficult to get finance to fund your business.

PARTNERSHIP

Forming a partnership allows two or more people to set up in business together, sharing profits, management burdens- and risks. Partnerships allows you to share the responsibility of managing a business. And joining forces with other people may mean you have more money to invest in the business. Partners share personal responsibility for business debts. They put their own possessions on the line if things go wrong.

On the other hand, a limited liability partnership or LLP shares many of the features of a normal partnership -but it also offers reduced personal responsibility for business debts.

LIMITED COMPANY

A limited company may offer reduced responsibility for business debts- but it brings a range a range of extra legal duties, too. Private companies limited by shares generally protect the individual from personal responsibility for business debts. Your personal risk will be restricted to hoe much you invest in the business and any financial guarantees you have given in order to obtain financing.

However, if the company fails and you have not carried out your duties as a company director, you may be liable to pay the company's debts or be disqualified from acting as a director in another company.