When one or more individuals decide to start a business, they have a choice as to what vehicle they use to operate that business. In addition to the commercial and legal reasons which help determine that choice, the tax treatment of each form of vehicle is often a decisive factor in whether it is appropriate for carrying on a particular business.
The main UK business vehicles available are:
a sole trader
a general partnership
a limited partnership
a limited liability partnership, and
a company
A summary of the tax consequences of operating a business in each of those structures is found in Practice Note: Forms of business vehicle—tax summary, and a table briefly comparing them is found in: Choice of business vehicle—tax comparison table. For specific rates and thresholds applicable to the current tax year, see Practice Note: Key UK tax rates, thresholds and allowances.
The factors relevant to the tax element of the decision between different business vehicles are:
layers of tax—the number of taxable entities involved in the structure
current
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