What is a Limited Company?
A limited company is an organisation that you can set up to run your business – it’s responsible in its own right for everything it does and its finances are separate to your personal finances.
What is a Sole Trader?
If you start working for yourself, you’re classed as a self-employed sole trader – even if you’ve not yet told HM Revenue and Customs (HMRC).
As a sole trader, you run your own business as an individual. You can keep all your business’s profits after you’ve paid tax on them.
You can employ staff. ‘Sole trader’ means you’re responsible for the business, not that you have to work alone.
You’re personally responsible for any losses your business makes.
The key Advantages and Disadvantages of Companies are shown below:
|Credibility – be seen as a serious business||Reporting – annual return, statutory accounts and corporation tax return|
|Tax – normally you will pay less tax by having a company||IR35 – are you a disguised employee|
|Reduced risk – you are protected from personal liability||Directors – obigations under the Companies Act|
|Flexible – shares can be created and transferred||Advice – professional help and advice reqiured to maximise benefits|
How do you form a Limited Company?
You can form your company directly with Companies House for £15, it normally takes 24 hours. We can form it for you, ensuring the optimum share structure is in place and we than also deal with any VAT or payroll registrations required with HMRC.
- the company’s name and registered address
- names and addresses of directors (and company secretary if you have one)
- details of shareholders and share capital
What are the next steps?
Once your company has been formed you need to:
- Open a bank account for the Company, this can often take a couple of weeks
- Register for Corporation Tax
- Register for other taxes (if they apply to your business) – VAT, PAYE, CIS
- Set up your accounting software
- Create shareholder agreements, contracts and other legal documents (if required)
Starting a new business, whether sole trader or Limited, needs careful consideration, a business plan and some start up capital to name but a few things. We do recommend you come and talk to us right at the beginning so things are set up in the best way that works for you. What may be the optimum route for one person is not necessarily the same for another – we offer bespoke advice.