Limited Company or Sole Trader? What’s right for you?
At Ireland & Company we’re privileged to meet so many talented individuals from Kibworth. Starting out on a new business venture, a question that comes up time and again is how to structure their business. Where it is an individual or ‘one man band’ the choice is often between being a sole trader or operating through a limited company.
An individual and a limited company are separate legal entities. For a new business venture, historically a limited company route had lower tax overall than sole trade. They are more or less about equal now, subject to the upcoming budget on 30 October this year.
Sole Trader
There are some benefits of running a new business venture as a sole trade:
- Cheaper – You avoid the administration costs of maintaining a limited company
- Simpler – it’s just you trading
Limited Company
There are some benefits of running a new business venture through a limited company:
Risk
If the business fails, it is the limited company that owes the creditors money, not you personally. Creditors can only pursue the assets of the limited company. If it is sole trade, creditors can pursue all your personal assets
Control personal income
If you have various sources of income you may want to control how much income you receive when (e.g. if you are close to going into next tax band you may want to delay that income till next tax year). Your income from a sole trade business is based on when you make the profit
Flexibility
It is easier to bring in new people, they can join as shareholders or directors
Exit
May be easier to sell business from limited company or sell company itself.
What is Right for You?
Clearly there is no one size fits all, so much depends upon personal circumstances and aims. We would strongly recommend that professional advice is taken as early as possible to plot the path for success for you and your business.
Peter Anderson
Ireland & Company, Accountants
mail:info@irelandandcompany.co.uk
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