Starting A Company ~ Limited Vs Sole Trader (UK)
Starting a company (UK)
Hoorah! You have made the decision to start your own business. Now your brain is buzzing with ideas, websites, creative marketing, getting your name out there – selling your products or services. Your energy and motivation is through the roof right now – this s**t just got real.
An important decision you need to make now you are in business, is to decide what type of entity you want to be. A sole trader (self-employed) or a Limited Company. Please note this applies to the UK only.
Choose a legal structure for your business a great UK Government website provides exact details of what is required from you. I am going to break it down in nice easy chunks – after all, you are still buzzing and thinking about HMRC is the last thing on your mind.
Sole Trader (or self-employed)
- you work for yourself
- you are responsible for the business
- you must submit a self-assessment. pay income tax on profits and National Insurance contributions
- you get to keep all the business profits (after tax of course)
- less paperwork
- you are liable for any debts
- you can employ people
- it is a little more complicated and requires more paperwork
- you need to register with Companies House and HMRC and setting up a Limited Company is a little more complicated (and costs a little more)
- you are a Director of the Company (and are too responsible for self-assessment, income tax and National Insurance)
- some organisations will only work with Limited Companies
- you have legal responsibilities to make the company a success
- you have limited liability as a Director
- the company needs to pay corporation tax
I have linked a couple of useful links, which will help you make an informed decision based on facts. However, you need to decide which is best for you. What fits in with your products or services, your budget and how you want to run your business. After all, this is your new journey.
One thing I would stress on both fronts, keep good records of all your accounts. Good bookkeeping will be important regardless.
And don’t forget, you can always start as a Sole Trader and become a Limited Company as you evolve and grow.
I am really interested in hearing what being self-employed is like in other parts of the world – if you would like to offer your advice and guest blog for us, please get in touch here.
Good luck in your new adventure and be sure to leave your comments below on your experience.
Live, love and laugh (and be awesome)
P.S. Make sure you have signed up to our newsletter and follow us over on all our social media channels. All the links to our social media channel can be found on the top right of the blog.