Sole Trader vs Limited Company
Sole Trader
At DMB Accounts, we can offer you support as a sole trade. We have a wealth of experience and an impressive portfolio of sole trader clients. You will be able to tap into a vast array of resources and services to help you with business decision making.
Even though there are many rewards of being a sole proprietor, there is still a strict guideline that needs to be followed to allow the tax assessment year to operate with ease.
If you are already set up as a sole trader or are thinking of starting a business as a sole trader, then contact DMB Accounts where we can help small businesses and self employed individuals.
The advantages of setting up as a sole trader:
- Simplicity - Easier to set up and ongoing administrive commitments and lower accountancy fees.
- Privacy - Any financial or business affairs are kept private so no competitors can have insight into the success of your business, Limited Companies have to file Balance Sheet at companies house.
The disadvantages of setting up as a sole trader:
- Unlimited Liability - You have unlimited liability, which means you are solely accountable for any debts your business may be in and the risk is upon yourself if you can not pay the business debts
- National Insurance - Business profits are subject to national insurance.
Limited Companies
Setting up as a Limited Company may be beneficial for most, as you are protected from its financial problems. But in exchange, there is also the downfall of setting up as a limited company. You will loose some privacy as directors and all shareholder information has to be filed and is available to the public.
A limited company is owned by their shareholders, this means that the company’s assets and liabilities are separate to the individual and remains the responsibility of the company.
The advantages of setting up as a Limited Company:
- Limited Liability - There is limited financial liability, so liability only lies on what has been invested into the company. Although many businesses require personal guarantees on supplier accounts.
- Ease of transfer - The ownership of shares within the company is transferred easily by selling shares
- Tax Planning - Take advantage of tax planning strategies
- Dividends - Not subject to National Insurance.
The disadvantages of setting up as a Limited Company:
- Higher administration Costs - This is on-going, as you have to file your annual accounts at Companies House every year. We can advise you on the professional costs that is involved such as preparing accounts and tax returns (£600 + VAT)
- Limited Privacy - There is limited privacy, anyone can look into your company accounts (Balance Sheet) and are able to check certain details of shareholders.
- Winding up – For a limited company this is more expensive and complex than sole trading or a partnership.
- Audit requirement – If the company exceeds certain size or is in a particular sector will require audit. Small business are normally exempt.
How we can help your business:
DMB Accounts can assess the benefits of staying as a sole trader or change to a Limited Company, HMRC Correspondence as well as National Insurance exemptions. Let us guide you and your business in the best possible way so you don't have to worry about your finances.
Please contact us on 01202 42 33 14 where someone is happy to help you today.