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Sole Trader or Limited Company?

One of the key questions many businesses ask themselves is whether to work as a sole trader or trade through their own limited company. 

Whilst there are numerous benefits to going limited, many businesses choose the sole trader option. This is primarily because although going limited might be more financially rewarding, with lower taxes and more tax planning opportunities, they think there will be far more administration and legal commitments by going limited.

Without a doubt, as accountants the most common question we get asked is 'should I go limited?' but the reality is that there is no easy answer. Everyone's situation is different and what's right for one person might not be right for another. As well as the obvious issues of tax and national insurance contributions, there are many other factors which might influence your decision, for example:

  • What your turnover is and how much profit you make
  • Your future plans to grow the business
  • What level of commercial risk you will be exposed to
  • Whether customer perception matters
  • What plans you have, or would like, for pensions and retirement
  • Would you like to sell your business in the future
  • Do you have the time to manage a limited company
  • Reducing your tax bill vs extra time working on and not in your business

So, there are lots of things to think about, and most important of all is your own personal preference. You might want the simplicity of being a sole trader rather than a limited company, or you might prefer the security of having ‘limited liability’. In order to make that decision you must have all the information at your fingertips, which is where Easy Accountancy can help.

For a quick summary on either being a sole trader or limited company, why not watch the below video:

Advantages and disadvantages

As with all major business decisions, there are pros and cons to each option. Here are some of the key advantages and disadvantages of trading as a sole trader, rather than through a limited company:

Sole trader / self employed – a' life more simple' and an easy way to start in business

  • No set up costs
  • No limited company formation fees
  • Lower priced accountancy fees
  • Less government departments to liaise with
  • Just submit a tax return once a year
  • The usual route most people take when just starting out
  • Higher personal risk - you will be personally responsible for the company’s debts, so your personal assets can be at risk
  • Less opportunities for tax planning 

Limited company - a life 'slightly more complicated', but necessary for some!

  • Some customers, usually PLCs or larger limited companies, will only work with other limited companies which may mean you have to go limited
  • More costly starting up as you will have to pay to form a Limited company
  • You have to file your accounts at Companies House each year, which will be on public record
  • You also have to file accounts, company tax and corporation tax calculations with HM Revenue and Customs every year
  • Accountancy fees are generally more expensive
  • You are separate from the company, so your personal possessions may not be at risk, unlike if you’re self employed
  • You may appear to be a little more professional
  • Better tax planning opportunities 

If you wish to find out more about which option might be best for you, why not call one of our friendly expert accountants call 0500 234 111 / 01442 275767 or email heather@easyaccountancy.co.uk

Why Clients Choose Easy Accountancy

Easy Accountancy offers a low cost, fixed fee accountancy package with all clients receiving their own dedicated, friendly, approachable accountant.

All of our accountants specialise in providing accountancy services to the self-employed, freelancers, sole traders, small to medium sized limited companies and private individuals. All accountants are employees of Easy Accountancy and we never outsource or offshore work.

Our low cost, all-inclusive fixed-fee accountancy service includes unlimited access to your own dedicated accountant throughout the year and covers all your business and personal tax affairs needs.

All our accountancy services include:
  - Unlimited access to your accountant
  - Ongoing advice on how to manage your business
  - Proactive tax advice throughout the year
  - Updates and reminders so you'll never miss a deadline
  - Free bookkeeping software

As a sole trader our fees start at just £30 + VAT a month, for this you receive the above plus:
  - Completion of your Self-Assessment tax return
  - Advice on how much Income Tax to pay
  - Guidance on National Insurance contributions

As a limited company our fixed fee packages are bespoke to your needs, however typically you’ll receive the above, plus:
  - Completion of your year end accounts*
  - Completion and submission of your annual return Companies House
  - The director/s Self Assessment tax return
  - Payroll bureau
  - Dividends and corporation tax computations

We’ve saved our clients up to half on their accountancy bills – if you’d like a quote, click on the quote me button to the right of this page. Alternatively, call us on 0500 234111 / 01442 275767 or email heather@easyaccountancy.co.uk.

*If you would like us to complete your company year end accounts we simply ask that you have been a client of Easy Accountancy for one year or have made 12 monthly payments.