The advantages of being a sole trader include independence, ease of set up and running your business, and the fact that all the profits go to you.
The disadvantages include a lack of support, unlimited liability, the prospect of paying more tax on high profits and the fact that you are personally responsible for any debts run up by your business.
The advantages of being in a partnership include its ease of set up and running, and the range of skills and experience that the partners can bring to the business.
On the other hand, problems can occur when there are disagreements between partners. There is unlimited liability and all partners are each personally responsible for all of the debts that the business runs up. Again there is the prospect of paying more tax on high profits than if you have a company.
Limited Liability Partnership (LLP)
LLPs retain the flexibility of a partnership with the added advantage that your personal liability is limited. At least two members must be 'designated members' - the law places extra responsibilities on them.
The formation of an LLP is more complex and costly than that of a conventional partnership. Problems can still arise when there are disagreements between the members. Again there is the prospect of paying more tax on high profits than if you have a company.
Limited Liability Company
If you run your business through a company your personal financial risk will be restricted to how much you invest in the business and any guarantees you have given in order to obtain financing. You will also be able to retain more money in the company after paying less tax than if you operate as a sole trader or partnership.
However, you should remember that this type of business structure, more than any other, also brings a range of extra legal duties, including the maintenance of the company's public records, e.g. for the purpose of the filing of accounts.
The major advantage of a franchise is that it takes advantage of the success of an established business and support networks. Even if you become a franchisee you may still be allowed to choose whether or not to operate as a limited company.
However, as a franchisee your freedom to manage the business will be constrained by the terms of the franchise agreement. Also franchisees often pay a share of their turnover to the franchiser, which reduces overall profits.
Social enterprises are businesses that trade for a social purpose and represent a diverse and growing range of business activity across the UK.