{"id":6518,"date":"2019-08-23T09:14:16","date_gmt":"2019-08-23T08:14:16","guid":{"rendered":"https:\/\/www.qualitycompanyformations.co.uk\/blog\/?p=6518"},"modified":"2024-09-18T09:51:33","modified_gmt":"2024-09-18T08:51:33","slug":"sole-trader-or-limited-company-what-is-better-for-me","status":"publish","type":"post","link":"https:\/\/www.qualitycompanyformations.co.uk\/blog\/sole-trader-or-limited-company-what-is-better-for-me\/","title":{"rendered":"Sole trader or limited company \u2013 which is better for me?"},"content":{"rendered":"
\n Last updated: 18 Sep 2024<\/strong>\n <\/div>\n \n

Every business needs to operate within a defined legal structure. If you\u2019re considering setting up a business, one of the questions you need to ask yourself is whether to be a sole trader or limited company. We will discuss both structures below to help you to make an informed decision that is best for you and your business.<\/p>\n

What is a sole trader?<\/h3>\n

Being a sole trader means you\u2019re self-employed and can keep any profits you earn after tax. It is important to be aware that, as a sole trader, you will be personally responsible for any losses your business makes.<\/p>\n

Setting up as a sole trader is simple and you can start trading immediately.<\/p>\n Our Fully Inclusive Package - the perfect way to form a limited company<\/span><\/a>\n \n

Once you earn more than \u00a31,000 in a tax year (which starts on April 6th and ends on April 5th the following year) you\u2019ll need to register for Self-Assessment<\/a>. If turnover exceeds \u00a390,000, you\u2019ll need to register for VAT. You can register your company for VAT here<\/a>.<\/p>\n

As the most popular business structure in the UK, 60% of businesses fall into the sole trader category.<\/p>\n

What is a private limited company?<\/h3>\n

This business structure has its own legal identity, separate from that of its owners (aka ‘shareholders’ or ‘members’) and directors (who may also be shareholders). Members of a limited by shares company receive dividends from post-tax profits. Directors are usually paid a salary. If they are also shareholders, directors can receive all or some of their income in the form of dividends.<\/p>\n

The limited liability nature of this type of business structure means that the personal assets of members are not at risk if the business runs into financial difficulty. Rather, shareholders only risk losing what they have already invested in the company and\/or agreed to pay for their shares.<\/p>\n 5 things you need to form a limited company<\/span><\/a>\n \n

There are more legalities involved with running a limited company. The directors, who are legally responsible for all day-to-day management and corporate compliance, must ensure that the company meets its statutory obligations.<\/p>\n

This includes preparing annual accounts and confirmation statements (previously the ‘annual return’) with Companies House, submitting tax returns and statutory accounts to HMRC, and adhering to all record-keeping and disclosure requirements prescribed by the Companies Act 2006<\/a>.<\/p>\n

What are the advantages of being a sole trader?<\/h3>\n