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Business types

To put your business on a proper footing you need to make sure that it has the right legal structure. It's worth thinking carefully about which structure best suits the way that you do business, as this will affect:
  • the tax and National Insurance that you pay
  • the records and accounts that you have to keep
  • your financial liability if the business runs into trouble
  • the ways your business can raise money
  • the way management decisions are made about the business
There are several structures to choose from, depending on your situation.

Sole trader

Being a sole trader is the simplest way to run a business, and does not involve paying any registration fees. Keeping records and accounts is straightforward, and you get to keep all the profits. But you are personally liable for any debts that your business runs up, which can make this a risky option for businesses that need a lot of investment, however most start up therapy practices do not require much investment.

Most therapy practices (approximately 70%) operate as a sole trader or partnership, and nearly all start their business this way.

The advantages of being a sole trader include independence, ease of set up and running, and that all the profits go to you.

The disadvantages include a lack of support, unlimited liability and the fact that you are personally responsible for any debts run up by your business.


In a partnership, two or more people share the risks, costs, and responsibilities of being in business. Each partner is self-employed and takes a share of the profits. Usually, each partner shares in the decision-making and is personally responsible for any debts that the business runs up.

Unlike a limited company, a partnership has no legal existence distinct from the partners themselves. If one of the partners resigns, dies or goes bankrupt, the partnership must be dissolved but the business may not need to cease. A partnership is a relatively simple and flexible way for two or more people to own and run a business together. However, partners do not enjoy any protection if the business fails.

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, as a partner, you are personally responsible for any debts that the business runs up.

Limited liability companies

Limited companies exist in their own right. This means the company's finances are distinct from the personal finances of their owners.

Shareholders may be individuals or other companies. They are not responsible for the company's debts unless they have given guarantees (of a bank loan, for example). However, they may lose the money they have invested in the company if it fails.

In a limited liability 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. But you should remember that this type of company also brings a range of extra legal duties, including the maintenance of the company's public records, eg filing of accounts.


For start-up therapy practices the usual route to take is to register as a sole trader. If there two or more people are starting the practice the usual route would be to register a partnership.

In the future, when your business is generating a large profit, or you wish to secure a large investment in your business, you may wish to change your business to a limited liability company. You should always discuss this option with an accountant prior to making any decisions.

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