When setting up a business it is important to consider the various entities through which the business can operate, such as

a limited company; a limited liability partnership; an unlimited partnership; or a sole trader. You should talk to an accountant to discuss which of these options would be the most tax efficient. Once you have done so, our Business Law team can advise you on the legal pros and cons of each option. For some basic information, see "What are the differences between a limited company, a partnership and a sole trader?".

Once you know what form your business will take, you should consider other legal protection, for example the terms on which your business will operate, how to comply with relevant law (employment, health & safety, data protection), how you will govern your relationship with any co-owners of the business and whether you have any intellectual property that needs protecting. Forbes Solicitors can help you ensure your business has the adequate protection in place once set up.

A sole trader is one individual person who owns and runs a business on his or her own. They may have a business name, e.g. Joe Bloggs trading as Bloggs Enterprises or may trade under their own name. The sole trader may employ its own staff but all contracts, including those made in the course of trade will be in the trader's own name. The trader has unlimited personal liability for the business so he or she can be sued for the actions of the business and will personally carry all the debts of the business. The definition of a partnership is where two or more people operate a business together with a view to making profit. Subject to the existence of a partnership agreement with terms to the contrary, the property of the business will be owned by the partners in their joint names and all contracts will be made with the partners, whether or not the partnership has a trading name. Again, subject to the terms of any partnership agreement, the liabilities and debts of the business rest with the partners as individuals. In general, subject to the terms of any partnership agreement the liability of the partners is joint and several therefore each partner could be sued for the whole of the partnership's liability but each may be able to obtain contributions from the others. A company limited by shares is a separate legal person, i.e. it can own property in its own right, employ staff and can be sued (and sue) in its own name. It is owned by its shareholders but run on a day-to-day basis by the directors. The shareholders and directors may or may not be the same people. In general terms the liability of the shareholders is limited to the price they paid for their shares, i.e. where the company ceases to exist, the most a shareholder stands to lose is the price he paid for his or her shares. The taxation regime for a company limited by shares is different to those entities listed above and a company limited by shares will pay Corporation Tax on its income. There are various forms of limited companies other than a company limited by shares. A limited liability partnership ("LLP") combines the internal flexibility of a partnership whilst providing the protection of limited liability for the partners afforded by a private company. The LLP is a separate legal entity and so enters into contracts, employs staff and sues and can be sued, much like a private company. The LLP is owned by the members. Unlike companies, the members will be charged income tax on their earnings from the LLP, similar to the tax regime of a standard partnership. Our team can provide assistance on the drafting of these business agreements.