Compare Ltd, LLP and Sole Trader structures in the UK for 2025. Discover legal, tax and setup differences to choose the best option. Ideal for UK and non-UK residents.

Ltd vs LLP vs Sole Trader: Which UK Business Structure is Right for You in 2025?

Company Formation

Discover the key differences between UK company structures and find the right setup for your business goals in 2025. Starting a business in the UK in 2025? One of the first—and most important—decisions you’ll need to make is choosing the right business structure. Whether you're a UK resident or setting up from abroad, understanding the differences between a Limited Company (Ltd), Limited Liability Partnership (LLP), and Sole Trader is essential for legal compliance, tax efficiency, and long-term growth. In this guide, we break down the pros, cons, and legal obligations of each structure to help you make an informed choice for your new venture.

Overview of UK Business Structures

Structure Legal Status Liability Taxation Best For
Ltd Company Separate legal entity Limited to share capital Corporation Tax (19%-25%) Scaling businesses, global trade
LLP Separate legal entity Limited to capital contributed Self-assessed Income Tax Partnerships in professional services
Sole Trader Not a separate entity Unlimited (personal liability) Income Tax & NI Freelancers, microbusinesses
Bar graph comparing Ltd, LLP, and Sole Trader UK business structures in 2025 by liability, tax efficiency, admin burden, and credibility.

Private Limited Company (Ltd)

A Ltd company is a registered, separate legal entity that offers limited liability to shareholders and is regulated under the Companies Act 2006.

Advantages

  • Limited liability protection
  • Separate legal entity
  • Tax-efficient for growing businesses
  • Professional and credible structure
  • Dividend options for profit distribution

Disadvantages

  • Must comply with Companies House filings
  • Directors’ legal responsibilities

Limited Liability Partnership (LLP)

An LLP offers a flexible partnership structure with limited liability, commonly used by professionals such as accountants, consultants, and legal firms.

Advantages

  • Limited liability for all partners
  • Flexible profit-sharing
  • No Corporation Tax — taxed as individuals

Disadvantages

  • Requires two or more members
  • Annual filings to Companies House

Sole Trader

The simplest way to operate a business in the UK, suitable for freelancers and small businesses. Sole traders report to HMRC via Self Assessment.

Advantages

  • Quick and easy to set up
  • Low administrative burden
  • Full control over the business

Disadvantages

  • Unlimited personal liability
  • Lower credibility for scaling
  • Higher taxes at certain thresholds

Choosing the Right Structure

Your ideal structure depends on risk, scalability, and whether you're working solo or with partners.

Scenario Recommended Structure
Scaling with investment Ltd Company
Solo freelancer Sole Trader or Ltd
Professional partners LLP
Non-UK resident Ltd Company

FAQs

Yes. There are no residency restrictions. Non-UK residents can register a Ltd company in the UK, but must provide a UK registered office address.

No. LLPs are tax-transparent entities. Each member pays Income Tax through Self Assessment on their share of profits.

No. Sole traders only register with HMRC for Self Assessment and are not listed on Companies House.

The Corporation Tax rate is 19% for profits under £50,000 and 25% for profits over £250,000, with marginal relief between these.

If your UK taxable turnover exceeds £90,000 (as of 2025), VAT registration is required. Voluntary registration is also possible for smaller businesses.

Published: 8/7/2025 10:18:56 AM. Disclaimer: This article is for informational purposes only and does not constitute legal or financial advice.
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Ltd vs LLP vs Sole Trader: Which UK Business Structure is Right for You in 2025?

About CG Incorporations

We are professional UK Company Formation Agents providing quick, efficient and cost effective services to both domestic and international clientele. We offer everything you need to help your new business get started.

Author: Tripty Carpenter

Author: Tripty Carpenter

A driven and determined entrepreneur with over 12 years of experience in the corporate services and accounting sector, specialising in UK company formation. Tripty is the Director and founder of CG Incorporations limited, her drive, determination, and focus on excellent customer service have been instrumental in the company's growth and continual client happiness.

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