Not every business needs to be a limited company. Many people start out as a sole trader or in a partnership, which can be simpler and cheaper to run. But there are still registration steps to follow. Here is how to get set up correctly in England and Wales, and the differences between the main options.
Sole trader
A sole trader is an individual running a business on their own account. You and the business are the same legal person, so you keep the profits (after tax) but are personally liable for the debts.
To register:
- tell HMRC that you are self-employed and register for Self Assessment (you must do this by the deadline, generally by 5 October after the end of the tax year in which you started);
- file an annual Self Assessment tax return and pay Income Tax and National Insurance on your profits;
- register for VAT if your turnover exceeds the threshold; and
- keep proper records of income and expenses.
You do not register a sole trader at Companies House, though you must follow rules on business names (you cannot use a name that is misleading or implies a different status).
Ordinary partnership
A partnership is two or more people running a business together, sharing profits and (usually) liability. In an ordinary partnership, the partners are jointly liable for the business's debts.
To register:
- the partnership registers with HMRC, and a nominated partner is responsible for the partnership's tax return;
- each partner also registers for Self Assessment and pays tax on their share of the profits; and
- a written partnership agreement is strongly advisable (otherwise the default rules of the Partnership Act 1890 apply, which are rarely what modern partners want).
Limited partnerships and LLPs
There are also two registered partnership structures, set up at Companies House:
- a Limited Partnership (LP) has general partners (who manage and are fully liable) and limited partners (whose liability is limited but who cannot manage); and
- a Limited Liability Partnership (LLP) is a separate legal entity giving its members limited liability, combining partnership flexibility with company-style protection. LLPs file accounts and information at Companies House.
Other things to sort out
- Licences and permits for your activity (some trades need them).
- Insurance (including compulsory employers' liability if you take on staff).
- A business bank account and, where relevant, VAT/PAYE registration.
Key takeaways
- A sole trader registers with HMRC for Self Assessment, simple, but you are personally liable.
- A partnership registers with HMRC (with a nominated partner); each partner is taxed on their share, get a written partnership agreement.
- LPs and LLPs are registered at Companies House; an LLP gives members limited liability.
- Don't forget licences, insurance, VAT/PAYE and good record-keeping.
Sources
- HMRC Self Assessment registration for the self-employed and partnerships
- Partnership Act 1890 (ordinary partnerships); Limited Partnerships Act 1907; Limited Liability Partnerships Act 2000
- Business names rules
--- This article is general information about the law of England & Wales as at 2026, not legal or tax advice. For advice on your circumstances, consult a qualified solicitor or accountant.