The Basics of Party and Signatory Types

When a contract is entered into it is vital that you to be able to enforce it when necessary. To allow you to do this the contract must:

• Be properly executed by all parties
• Accurately describe the legal status of all parties included in the contract

There are five main types of legal statuses that can be applied to businesses being run in the UK. They are as follows:

• Sole Trader – This designation is for a one person business that has no permanent employees
• Partnership – This type of business is run by one or more people or firms who work together in collaboration
• Limited Liability Partnership or LLP – Works in the same way as a partnership, but personal liability of the parties involved is limited by incorporating it as an LLP
• Limited or Public Limited Company – PLCs or LTD firms are businesses that are run and owned by individuals or groups of people. Incorporating a business as a limited company is also a way to limit personal liability.
• Other Structure –  In the UK it is also possible to set up other kinds of organisations. This includes charities, mutuals, friendly societies and clubs

It is important not to make an assumption about the legal status of a firm you are working with. For example, a firm called John Walker & Sons could be:

• A sole trader with no son or person called Walker involved
• A partnership owned by John Walker and his son or by several other people none of whom are called Walker.
• A company who trades as John Walker & Sons, but is actually registered as ‘John Walker Limited’

Refer to our Your Responsibilities page for guidance about drawing up an accurate agreement and writing a contract that is legally enforceable.

For more information or to arrange an appointment call Hylton Potts on 0207 381 8111 or email us.