Everything you wanted to know about company structures, but were afraid to ask

Whether you're a sole trader or fancy going alternative with holacracy, MT has you covered.

by Rachel Savage
Last Updated: 28 Feb 2014

1. Sole trader 

The self-employed woman/man in a van – no red tape, no endless Companies House filings, and no one to keep you company. A sole trader is also legally and financially responsible if things go wrong with their business. Better get reading the small print…

2. Partnership 

Not to be confused with a John Lewis-style partnership (see below), this is for those who don’t want to face self-employment alone. As above, except if one half racks up debts creditors can come after the other for their dollar, so choose your partner wisely.

3. Limited company

The bread and butter of business structures. Register with Companies House and you’ll become an employee AND a shareholder (and probably a director too – a limited company has to have at least one). Paperwork goes up, as Ltds have to file accounts annually and submit themselves to the tedious terror that is the annual audit, but on the bright side the company and not you will get sued for everything it’s got if it runs into legal trouble. 

4. Limited Liability Partnership (LLP) 

Beloved of lawyers and accountants (because a limited company can’t audit another one), LLPs do what they say on the tin – limit partners’ liability. The paperwork is similar to that of a limited company, but there are no shareholders, dividends or corporation taxes. Instead, partners are charged income tax on their share of profits.

5. Co-operative 

This is where company structures start to become a bit more ‘alternative’: fasten your seatbelts, kids. Co-operatives, also known as mutuals, are owned by and run for the benefit of their members, be they workers, producers, customers or the community (although they can actually be incorporated as a limited company in the UK). Despite being a bit warm and fuzzy – the International Cooperative Alliances says co-ops have to subscribe to values including honesty, openness, social responsibility and caring for others - co-ops are pretty mainstream (relatively). Co-op businesses include The Co-operative Group (which is run more to the taste of its hedge fund bond holders at the moment), New Zealand milk monolith Fonterra, Spanish conglomerate Mondragon and Israel’s biggest bus company, Egged.

6. Democracy 

Much like its political counterpart, workplace democracy covers a wide range of structures. Capitalist sceptics may turn up their nose at people power, but many popularly-ruled companies are pretty successful - from the John Lewis Partnership, whose 69,000-plus partners not only own the company but elect half of the board and sit on store, regional and national councils, to Fortune 500 health company DaVita, whose staff are ‘teammates’ in a ‘village’ (see MT’s feature on democracy at work for more examples).

7. Holacracy 

This new-fangled management phenomenon grabbed headlines at the end of last year, when Amazon-owned online fashion company Zappos adopted it. There are no job titles, only roles to fulfill within 'circles' that have set purposes. While many claimed Zappos had dispensed with hierarchy, there are actually higher circles which tell the lower ones what to do (or get rid of them all together). Confused? Despite Holacracy ( obvs) being exhaustively laid out in a mega-dull ‘constitution’, no one, its evangelistic founder Brian Robertson included, is really sure how it works in practice (such as how to make totally-not-important decisions around firing/hiring/deciding how much to pay people). Which makes the founders’ HolacracyOne consultancy, dedicated to helping companies figure this whole functionality thing out, super useful.

8. Company limited by guarantee 

A structure normally used by not-for-profit organisations, a company limited by guarantee has no shareholders, only members who act as guarantors, paying princely sums of around £1 if the company needs winding up. Businesses using this model include BUPA, Nuffield Health (which uses the status to act as a nifty combo of charity and company) and Network Rail.

9. Trust

Guardian Media Group owner The Scott Trust (which was converted into a limited company in 2008) has a higher calling than paying shareholders – ensuring the public sector's favourite newspaper’s financial and editorial independence in perpetuity. MT isn’t sure how long perpetuity really is though, considering the parlous state of the newspaper group’s finances.
 

10. Community Interest Company (CIC) 

Beloved of The Guardian (see above), which regularly tub thumps on their behalf, a CICs is normally a small social enterprise (craft brewers et al), but in theory it can actually be a full on PLC or private company. The caveat? It has to benefit the community, rather than owners or employees and can’t be political. Benefitting the community is decidely harder to measure than profits though, so the business model is cloudier than home-brewed beer.

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