12 Days of Start Up Day Two: Sole Trader or Limited Company

Day 2This 12 Days of Start Up series aims to provide you with all the information you need to get on the right path to self-employment. Starting a business can be like climbing a mountain, it may look daunting from the bottom but focus on one step at a time and you’ll soon be at the top. Past days can be found here.

Once you have completed your market research the next step is to decide to make your business sole trade or limited company. Which one you choose will have an impact on the tax you pay and how much legal and financial responsibility you will face.

To help you decide I have made a pros and cons list for both considerations.

Sole Trader – 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.

Limited Company – This limits how much the owner is liable if the business runs into trouble. Setting up a limited company could be more tax efficient because the profits belong to the company rather than you so you will be a paid employee as well as a shareholder. This option also allows you to take dividends as well.

However setting up a limited company is more costly and also requires more administration rather than registering as a sole trader.

If you’re having trouble deciding which is best please call the Start up team on 0191 516 6149 or click here.

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