In this article, we will clarify the difference between a business and a company. Many people use these terms interchangeably, but there are significant differences between them.

A business is an individual or organization that engages in commercial, professional, or industrial activities on a regular basis. This includes both for-profit and non-profit organizations. A business usually operates under a single name to build its reputation based on its identity.

There are two main types of businesses: sole traders and partnerships. A sole trader is an individual who exclusively owns a business and is solely responsible for it. In contrast, a partnership involves two or more individuals coming together to start a business. Any debt or profit of the business falls on the shoulders of the partners, which they share.

A company is a legal entity in its own right, separate from its owners. A company is also known as a corporate personhood and has many of the same legal rights and responsibilities as an individual. A company can enter into contracts, sue and be sued, pay taxes, hire employees, and borrow money.

There are different types of companies, including for-profit, non-profit, and financial entities like banks. The most common types of companies are public limited companies (PLC), private limited companies (LTD), limited liability partnerships (LLP), royal charters (RC), and community interest companies (CIC).

A PLC offers shares of stock to the general public, and anyone can purchase them. The shareholders have limited liability, meaning they cannot be held responsible for losses exceeding their investment in the company. In contrast, an LTD company’s shares are owned privately by a small group of shareholders or a non-government organization. The shareholders also have limited liability.

An LLP has a similar structure to a traditional partnership, with two or more individuals responsible for the company. The partners benefit from limited liability, unlike traditional partnerships. RC companies have been granted power by the monarch and are usually granted to companies that work in the public interest, such as the BBC and the Bank of England.

Lastly, CICs exist to benefit the community rather than shareholders, and profits are primarily reinvested into the CIC to enhance community benefit and achieve social objectives.

In summary, the key difference between a business and a company is the legal structure. A company is a separate legal entity, while a business is a person or group of people trading under a business name. Setting up a business is relatively simple, requiring only a business plan, name, and registration with HMRC. In contrast, starting a company is a more complex process, involving creating a separate legal entity, choosing directors, appointing a company secretary, and choosing shareholders or guarantors.