Should you register as a sole trader or a limited company?

Should you register as a sole trader or a limited company?

If you are starting a business alone, the structure you register your company under will
essentially depend on how much legal and financial responsibility you want to take for the
business if it runs into trouble. This guide will help you understand the difference between
operating as a sole trader (and just registering your business name) or setting yourself up as a
limited company.

Sole trader (Register your business name)
Setting up as a sole trader and simply registering your business name is the easiest option if
you are the only owner of the business. By setting up as a sole trader, you maintain complete
control over the business, keeping all the profits after tax. The law will not distinguish
between yourself and your business, meaning if the business runs into trouble, you will bear
all the legal and financial responsibility.

– Registering as a sole trader is the easiest option.
– You keep all the profits after tax.
– You bear all legal and financial responsibility.
– Send a Self-Assessment tax return every year
– Pay Income Tax on the profits your business makes.
– Pay National Insurance

Limited Company (Set up a company)
A limited company is a separate legal entity to its directors, limiting how much the owner is liable if the business runs into trouble. Setting up as a limited company could be more tax-efficient: the profits belong to the company, rather than you, so you are paid as an employee, as well as a shareholder if you take that option, which allows you to take dividends as well.

Setting up a limited company is costlier and requires more administration than registering as a sole trader, but in the long term, it’s less of a risk.

– A limited company is a separate legal entity to its directors
– You are paid as an employee and can choose to take dividends
– Setting up is costlier and more time-consuming but less of a risk.
– Put together statutory accounts
– Send HMRC Companies House an annual return
– The company must register for VAT if you expect its takings to be more than £85,000
a year.

Other things to consider:

– If you’re a director of a limited company, you must fill in a Self-Assessment tax return every year and pay tax and National Insurance through the PAYE system if the company pays you a salary.

– Company Name ?? or sole trader, in your name Trading as name ??
– Set up a bank account – business use only.
– Domain Name / Website
– Insurances ( Public liability & Professional Indemnity )
– Register for Self-Assessment with HMRC.
– Employing people – register for PAYE.
– Business Cards and stationery
– Membership of professional organisation
– Keep accurate bookkeeping records

So don’t delay, give Jeff a call on 07846 331314 today, to arrange a free 1 hour no obligation
chat to discuss your requirements.

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