In the UK, various business structures suit different needs, including:

Sole trader: This is the simplest form, with one individual owning and operating the business, bearing full responsibility for all liabilities and debts.

Partnerships: This involves two or more people:

• General partnership: Partners share unlimited liability and are equally responsible for management.
  
  
• Limited partnership: Some partners contribute financially with limited liability and do not engage in day-to-day management.
  
  
• Limited liability partnership (LLP): This structure offers features of both partnerships and limited companies, with partners enjoying limited liabilities, making it popular among professional services like law firms and accountancies.

Limited companies: These protect shareholders’ liabilities up to their investment and include:

• Private limited company (Ltd): Shares are privately held, making it suitable for small to medium sized enterprises.
  
  
• Public limited company (PLC): Shares can be offered to the public and come with stricter regulations.

Each structure has distinct implications for management, liability, and tax obligations.

There is no legal requirement to have a shareholders’ agreement but it can help prevent disputes and regulate the relationship between the shareholders, set rules around the ownership of shares and assist in the management of the business.  It can also be used to resolve disputes amicably and plan shareholders’ exit strategies. It is important that advice is taken when drafting a shareholders’ agreement to minimise potential future risks.

Shareholders own the business by owning its shares, whereas the directors manage it day-to-day. The same person can be a shareholder and a director which allows an individual to set up and manage a limited company on their own.

Business terms and conditions are strongly recommended as they set out the rules and expectations between your business and its customers or clients; helping to avoid difficult situations like not getting paid and protecting your business’s legal rights under UK company law. They clarify obligations, safeguard your rights, and reduce potential disputes.

Due diligence is a comprehensive appraisal of a business prior to signing a sale and purchase agreement. It is a critical process in business transactions, particularly in mergers and acquisitions, as it thoroughly investigates all aspects of a company’s operations.

This process includes the assessment of financial records, legal compliance, business operations, and strategic positioning within the industry. Due diligence confirms all material facts and ensures that nothing significant is hidden, thereby reducing the risks associated with business transactions.