Unincorporated Companies

Unincorporated Companies

Unincorporated companies make up a large percentage of all businesses in the UK today. In simple terms there are only two primary forms of business structure; incorporated and unincorporated. Unincorporated companies can be sole traders or partnerships and there are many advantages to setting up as an unincorporated company.

A sole trader is a business that is owned by one person, but may have many employees. It is the most common form of ownership in the UK and is also sometimes referred to as a sole proprietor. The sole trader or owner has total control of the business. On the other hand, it also means that a sole trader as the owner of the unincorporated company is liable for any debts that the business incurs. This potential risk often puts off some sole traders from setting up unincorporated companies.

What are the Benefits of Unincorporated Companies?

The main advantages to choosing an unincorporated business over a limited company are:

• Greater control over the business by the owner. They are not dictated too by directors having a say in the affairs of the business. The owner decides and has total control.

• Simple and cheap to start up. Unlike starting up an incorporated company there are very few forms to fill in. The law only requires unincorporated companies to register with the tax office and keep their business accounts and records for the Inland Revenue. The business owner must register as self employed within the first three months of full trading. They will have to pay self-assessment tax, national insurance contributions and VAT if necessary.

• The only legal requirements that have to be complied with are those that protect the customer, for example the Sales of Goods Act or the Data Protection Act. The unincorporated company is not required by law to provide details of their financials or accounts. This means that the company's business affairs are kept private. This is an advantage for companies that do not want their competitors to see details of what the business is earning.

• All the profit is retained by the owner or owners if the unincorporated company is a partnership.

So what are the implications when deciding whether to do business with an unincorporated company?

Well many of the things that are seen as advantages for the sole trader or unincorporated company are disadvantages for companies wanting to do business them. Unincorporated companies are being formed everyday and can be set up virtually instantly so keeping tracking of them can be difficult.

The fact that the unincorporated company does not have to submit public annual accounts like a limited company has to, means that it is not possible to analyse the businesses financial information.

Despite the difficulties it is possible to get information on unincorporated companies. A credit report on these types of non limited companies is available from checkSURE. Whilst they are not as comprehensive as full credit report on a limited company, these sole trader reports will still contain CCJ information, verify the trading address and assign a credit score where possible.

Unincorporated companies often pride themselves on being small, local, trustworthy businesses, so good relationships can be established with these businesses.

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