Starting a business is often a complex affair, with the main decision being whether to become a sole trader or set up as a limited company.
No legal distinction between you and the business. You will bear all the responsibility for the business, legally and financially. This could result in you losing your personal assets.
A limited company is a separate legal entity to the directors, limiting the liability if things go wrong. Personal liability is typically restricted to the share amount of the share holders.
Any profits you make after paying tax are yours to keep.
Any profits belong to the company, but can be shared amongst shareholders according to the portion their shares entitle them to. As a director, you can choose to pay yourself a combination of salary and dividends.
As a sole trader you can run your business with no requirement to make information available to the public.
Limited companies must provide their annual accounts to Companies House, who publish them online.
A sole trader may find that the business credit rating is affected by their personal credit rating, which could make it difficult to obtain business finance.
A limited company may find it easier to raise finance, as its credit rating is largely separate to its owners and directors.
Required to submit annual Self Assessment tax return. Might also be required to register for VAT and submit VAT returns.
Company accounts submitted to Companies House. Corporation Tax return submitted to HMRC. Director’s payroll might also require PAYE. Directors also register for Self Assessment and submit annual SA tax returns.
View our online accountant services to learn more about how we help sole traders and limited companies with their businesses. To talk to one of the team, just call 020 3355 4047, or use the live chat button on your screen.
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About The Author
Forensics graduate-turned copywriter and blogger. I love turning complex topics into easy to understand, yet engaging pieces of content.