What type of legal entity should I set up in the UK?

What is a legal entity in the UK?

In the UK, a legal entity is a formal organisation or entity recognised by the law as separate from its owners. These entities can make contracts, own property, and take legal action.

Types of legal entities

There are four options when choosing a UK legal entity type and set up:

1. An establishment

In business and legal terms, an establishment (formerly known as a branch) is essentially a subsidiary or an outpost of a company or organisation. This establishment operates in a different location or jurisdiction from its main or parent company but is still considered a part of the same legal entity. It’s like having multiple homes for your business, each with its own unique space and function. These establishments are crucial for various purposes, from company registration to making sure you’re abiding by local rules and regulations. They allow your business to expand its reach while keeping everything legally sound. So, if you’re thinking about establishing a new branch, you’re on the right track to growing and thriving in different locations!

2. A limited company (LTD)

A limited company is a robust and flexible business structure in the UK. It’s a legal entity separate from its owners, known as shareholders, and it offers the valuable advantage of limited liability, shielding your assets from the company’s debts. Your LTD operates independently, with the ability to own assets and engage in contracts. As a director, you oversee day-to-day operations, ensuring everything runs smoothly and in compliance with the law. What’s even better is that it’s a perpetual entity – your LTD continues to exist, regardless of changes in its shareholders. So, if you’re seeking a dependable and established business structure that combines protection and adaptability, the limited company is the way to go

3. A limited liability Partnership (LLP)

A Limited Liability Partnership (LLP) is like a trusty sidekick in the world of business structures. It’s a legal entity that provides a unique blend of liability protection and flexibility in the UK. With an LLP, its members enjoy the benefit of limited liability, meaning their personal assets are generally shielded from the partnership’s debts and legal obligations. This partnership entity is a distinct legal persona, allowing it to own assets, enter into contracts, and take legal actions in its name. Members, who are akin to partners, share in the management and profits while maintaining this critical liability protection. Whether you’re a professional service provider or part of a collaborative team, an LLP offers a practical and reliable choice for your business journey.

4. A PLC

A Public Limited Company (PLC) is a specific legal entity recognised in the UK and other jurisdictions. It’s a business structure tailored for larger enterprises that aim to offer their shares to the public on a stock exchange. A PLC typically has a broader shareholder base and can trade its shares publicly. This distinction, however, comes with increased regulatory responsibilities and reporting obligations to ensure transparency and compliance. If you’re planning to take your business to a larger scale and engage with the public stock market, the PLC is the right choice for you.

What legal types are most commonly used?

Over 90% of UK legal entities are set up as a LTD, with some businesses, mainly financial services, going down the LLP route. The LLP route is chosen for the ease with which new equity partners can join a firm, these tend to be C-Suite executives.

Setting up a legal entity with ECOVIS

Learn more about how we support International industry at every stage of Entering the UK Market business journey. As always, please feel free to get in touch with us to discuss your own business situation. Alternatively, email enquiries@ecovis.co.uk or call +44 (0)20 7495 2244.