Set up a Limited Company | Business Start up

A common question new business start-ups often ask our Chartered Certified Accountants is, “Should I start as a sole trader or set up a limited company?” That’s a very valid question, to begin with – one that requires careful consideration. The setup process, for example, is relatively straightforward when discussing sole traders. You’ll have minimal paperwork to deal with in any accounting period. There will be greater privacy as your personal business information will not be listed and available freely on Companies House. On the downside, sole traders are liable for all debts accrued, so if things go wrong and you cannot repay debts, you may have to give up or even sell your assets to settle the debts.

Starting a limited company offers a legal distinction between you and the company, meaning your personal assets are protected if things go south. However, successfully running a limited company requires much more responsibility, including preparing various paperwork each year on time, which can be both costly and time-consuming. A limited company provides flexibility in taking money out of the company account to meet personal tax needs through dividends, salary, or both in certain instances. However, you must pay Corporation Tax on your profits. With self-employment, you only pay income tax on the collective earnings of the business.