Forms of practice

Question 1

What are the different types of practice?

Answer 1

Sole trader
Partnership 
Limited Liability Partnership (LLP)
Private Company
Public Company

Local Authority
Charity

Question 2

Sole Trader - pros and cons

Answer 2

PROS
flexible and simple to set up (register with LI + PII)
full control
Tax = self-assessment (only legal requirement regarding finance)

CONS
full responsibility and liability as the owner and manage
assets (business and personal) are at risk

Question 3

Partnership - pros and cons

Answer 3

Managed by partners, governed by the Partnership Agreement

PROS
still flexible + benefit of combined expertise
simple set up register with LI + PII
set up under Partnership Act 1890
Tax: Income tax on profits (self-assessment)
Profits are private

CONS
Liability unlimited
personal and business assets at risk.
Partners are liable for own and each other’s actions (contract and tort) – civil
Only criminally liable for others if aware
Tax: Income tax on profits (self-assessment)
Profits are private

Question 4

Limited Liability Partnership - pros and cons

Answer 4

LLP Act 2000

PROS
Own legal entity. Personal assets are protected
Registered with Companies house

CONS
Tax: same as non LLP
profits are public

Question 5

Public Company (shares traded freely on Stockmarket)

Answer 5

Owned by shareholders managed by directors

PROS
Own legal entity
shareholder, directors and employees assets not at risk.
Tax: Employees subject to PAYEE + Corporate tax on profits.
directors only liable for their own torts

CONS
paperwork - Prepare and disclose company accounts, annual report, AGM and audits
Formation & Operation: Companies Act 1985/19

Question 6

Tell us about your practice

Answer 6

AECOM Infrastructure and Environment UK Limited
Private Limited Company

• SUBSIDUARY OF AECOM GLOBAL
• PUBLIC LIMITED COMPANY shares on stock market

Set up:
• Registered with Companies house
• Formed under and controlled by the Comp Act 2006

Management, Ownership & Liability:
• Owned by shareholders (not liable for Company torts)
• Managed by Directors (Liable only for their own torts)
• Company is a legal entity, meaning it can enter into contract, sue and be sued and own property
- The directors and shareholders personal assets are not at risk

Tax, pay and profit
• Company pays corporate tax, employee’s salaries are taxed through Pay As You Earn
• Profits are distributed among shareholders

Paperwork 
• Company must prepare and disclose the company accounts 
• Prepare annual financial report
• Hold AGMs 
• Externally audited

Question 7

If you were to set up your own practice what would it be?

Answer 7

Sole trader or partnership
simple to set up, (register with LI + PII)

Risks:
full responsibility and liability as the owner + manager
assets (business and personal) are at risk

Partnership would give me support of another professional and their knowledge.

Added risk:
Liable for any torts of my partner

Limited liability Partnership
- partner only liable for own torts, not contract - separate legal entity.