Differences between a limited company, a partnership and sole trader?

  • 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.

For more information please call our Business Law Solicitors on freephone 0800 975 2463 or contact us by email


Get in touch

Get in touch to see how our experts could help you.

0800 689 0831

04 Jan 2019



Forbes Offers Free Consultations Over Business Banking Switch

North West companies are being offered free help and advice by Forbes Solicitors, so that they are aware of…

Read the article

Forbes Solicitors delivers 'fast response times' and demonstrates 'impressive industry knowledge'.

2018-19 edition Legal 500

More clients

Very thorough and precise with each contract and have made it very easy for us to feel very confident going into new territories, whether it being a different country or a different manufacturer.


More clients

Forbes was instrumental in ensuring Electric Coffee Co is able to meet its growth ambitions.

Adnan Anwar
Electric Coffee Co

More clients

It is always a pleasure to deal with true professionals and specialists in their area and this is what you can expect when dealing with Forbes and, in our case, specifically Nick and Gemma.

Gareth & Janet Watson
Zinge Industries

More clients

The team not only provides professional and practical advice, but also takes a personal interest to understand the business and the matter at hand.

Mark Delaney
Leonard Curtis Business Solutions Group

More clients

The advice and service that we receive from Pauline and her colleagues is consistently professional, knowledgeable and efficient. They have a great ethos and are a pleasure to work with.

Andy Platt
Focus Insolvency Group

More clients

What a pleasure to do business with Forbes - Pauline Rigby & Nick Pickup both understood my personal objectives and requirements

John Laycock
Former Business Owner

More clients

I would like to thank Jayne and the Business Law team for being so friendly, professional and patient throughout the sale.

Arthur Porter
Oak Glen

More clients

We have been very happy with the professional service from Pauline Rigby and her colleagues in the Business Law team and the ease of purchasing our new business

Andrew M Jones
Internet Trading Ltd

More clients

I and the UCLan team wanted to acknowledge the support from your team, including Nick Pickup and Pauline Rigby. Their contribution has been much appreciated by both clients and our staff.

John Lonsdale
Head of Innovation and Enterprise

More clients

Sincere thanks for all the time, patience and professionalism from Pauline and Tricia in the completion of MAP12 contract terms and conditions.

Jayne & Anthony Mellor
MAP12 Ltd

More clients

It's a One Stop Shop as a legal entity, whatever problem we've got you've got someone to come and advise us or fix it

Craig Bancroft
Managing Director
The Northcote Group

More clients

We have always found Forbes to be approachable and helpful and we look forward to a continuing professional relationship

John Tempest
Chief Executive
Child Action Northwest

More clients

I have been extremely pleased with the legal team at Forbes and all their help

Tracy Malham
South Lakes Veterinary Centre

More clients

The team at Forbes have been professional, thorough, friendly and efficient from day one through to completion. We will certainly be using them again as we look to move our business forward.

Stuart Wilson
S & L Wilson

More clients

Make an enquiry