Accountancy in Great Britain

>> Choice of Legal Form in Great Britain

There are two principal forms of business organisation in the UK; corporate bodies such as companies, and unincorporated ventures such as sole traders and partnerships.


Generally, companies have a legal identity separate from their members. The liability of the members (shareholders) is limited to the amount of the par value of their shares. If the shares have been acquired as fully paid then the members will have no additional liability for debts of the company. No management board is required, although at least one director is required for a private company, at least two for a public company. The directors need not be shareholders, nor do they need to be resident in the UK (however, there may be tax implications if this is  the case).

The directors of companies are employees of the company and are normally paid salaries; shareholders benefit from the profits made by the company through the payment of dividends. If a shareholder is also a director he can choose to some extent between dividends and salary.

Companies are formed under the Companies Act and must file their accounts:

  • with the Registrar of Companies within nine months of their year-end (private companies) or six months (public companies)
  • with the UK tax authorities (HMRC) within 12 months of their year-end.

Companies are also required to file details of their directors and other key documentation with the Registrar of Companies at Companies House on incorporation and on an annual basis,  by means of a confirmation statement.

All documents filed with the Registrar of Companies are publicly available and may be obtained by any individual or business (which may be subject to a payment of  a fee).

Companies will normally prepare accounts for a 12-month period, and they can choose the date on which this period ends. They must have an address in the UK referred to as the “Registered Office” where legal documents can be sent by post or delivered. It need not be the same as the business address, e.g. the office of the company’s accountants.

Private companies

A private company is one which cannot issue shares to the general public. In most private companies the shareholders and directors are the same people. The company has ‘Limited’ after its name, commonly shortened to ‘Ltd’. In the UK, out of approximately 2,500,000 companies, 99 % are private companies, and of these the great majority have five or fewer shareholders.

Public limited companies

Public limited companies may make their shares available to the public at large and their shares can be traded on the various securities markets. Public limited companies are denoted by the letters “plc”, “Plc” or “PLC” at the end of their name. These companies, if their shares are traded, are subject to greater regulation than privately owned companies. In particular, they are subject to substantial regulations concerning corporate governance including such matters as the appointment of non-executive directors.

The minimum share capital for a PLC is £50,000, of which 25% must be paid up. The minimum number of directors is two and a PLC also requires a suitably qualified company secretary. There must also be at least two shareholders.


A limited liability company does not need to be a stand-alone company but can be part of a group. The shares in a UK Company can be owned by an overseas person. If a company owns more than 50% of the shares in another company, or controls the members’ voting in that company, the first company is known as a holding (or parent) company and the second a subsidiary.

General partnership

A partnership involves two or more people carrying on a business in common. Most partnerships are unlimited liability ventures with all partners having joint and several liabilities for the debts of the business. Any business debts may be recoverable from partners’ personal as well as business assets. Personal debts may be recovered against a partner’s individual share of the business. A Partnership Agreement will usually set  out the rights, responsibilities and rewards of the partners.

Accounts for the partnership do not have to be filed with the Registrar of Companies. The partners can choose the date of the end of the accounting period.

Limited liability partnership

Traditionally, under UK law a partnership does not have a legal identity separate from that of its members. However, since 2001, it has been possible to form a Limited Liability Partnership (LLP). An LLP provides the members with their personal liability limited to the capital they subscribe, except for matters of fraud or negligence. The partners have the same financial protection as members of limited companies but with the flexibility  in internal affairs of a partnership.

A LLP must be registered with the Registrar of Companies. It must file accounts and other information for the public record in the same manner as a limited company.

It is most commonly used for professional services such as accountants and lawyers and for property transactions.

Limited partnership

A limited partnership consists of one or more “general” partners, who are liable for all debts and obligations of the firm and one or more persons called “limited” partners, who contribute a sum of money as capital. Limited partners are not liable for a partnership’s debts beyond the amount they have contributed.

A limited partnership must be registered under the UK Limited Partnership Act 1907 and has to have its main place of business in the UK.

In most other respects, a limited partnership operates the same way  as a general partnership.

Sole proprietorship

A sole trader is an individual carrying on business on his own account. Any debts, whether business or personal, can be recovered against business and  personal assets.

Accounts for a sole trader do not have  to be filed for public record. A sole trader can choose the date of the end of his accounting period.

Overseas legal entities

An overseas business wishing to commence operations in the UK does not need to set up a company or partnership in the UK but it can set up a “UK establishment”. A UK establishment usually takes the form of either a “place of business” or a branch. A UK establishment needs to be registered with the Registrar of Companies.

A place of business, such as a representative office, may not itself be carrying on business activity in the UK,  or if it does it may be merely ancillary  or incidental to the parent’s overseas activity, and therefore may not give rise  to a taxable presence in the UK. A branch will generally be a self-contained UK operation, albeit acting within its overseas parent, and profits attributable to the branch will normally be fully subject to  UK tax.

Joint venture

An overseas company can join with a British company in a Joint Venture. There are a number of ways that such a joint venture can be formed, including a separate JV company, an LLP or another type of partnership vehicle.


The key feature of a trust in UK law is the separation of legal and beneficial ownership. The trustees are the legal owners of the trust property but the beneficial owners are the beneficiaries. The trustees are bound to administer and manage the trust property for the benefit of the beneficiaries. A trust document must be irrevocable and is usually evidenced in writing. Provided that certain basic conditions are fulfilled, it will be legally binding.

Non-profit organisations in the UK, such as charities, usually have the legal form of a trust or of a private company without a share capital but limited by guarantee.

Latest version updated 11th October 2017

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