Wednesday, 19 February 2014

I want to start my business... Sole trader or Limited company?





Hello :)

Hope you're well. I will show you what is the different between with Sole Trader and Limited Company.

If you are starting a business alone, the structure you register your company under will essentially depend on how much legal and financial responsibility you want to take for the business if it runs into trouble.
  1. Sole trader 
  2. Limited company 
  3. Things to consider 

Sole trader

Setting up as a sole trader and simply registering your business name is the easiest option if you are the only owner of the business. By setting up as a sole trader, you maintain complete control over the business, keeping all the profits after tax.

The law will not distinguish between yourself and your business, meaning if the business runs into trouble, you will bear all the legal and financial responsibility.
  • Registering as a sole trader is the easiest option
  • You keep all the profits after tax
  • You bear all legal and financial responsibility

My personal view
I think it is very risky because you can lose everything if it is run into trouble. But, it is very easy way to set up a business as sole trader. It is most suitable for the window cleaner, painter and any business with one to five employees.

Limited company
A limited company is a separate legal entity to its directors, limiting how much the owner is liable if the business runs into trouble. You need at least two people to become director of your company.

Setting up as a limited company could be more tax-efficient: the profits belong to the company, rather than you, so you are paid as an employee, as well as a shareholder if you take that option, which allows you to take dividends as well.

Setting up a limited company is costlier and requires more administration than registering as a sole trader, but in the long term, it's less of a risk.
  • A limited company is a separate legal entity to its directors 
  • You are paid as an employee and can choose to take dividends 
  • Setting up is costlier and more time-consuming but less of a risk

My Personal View
I got a Limited company with seven director's. It is very expensive to set up, but, it will be very good in the long term and your personal asset is protected.

Once, you have registered as a Director of your company and your name will be on the record. See the company check which you can check the company and director information. It will be good for the investment to check out their background and their company.

Things to consider
Registering a company can be hard work, especially if you're doing it for the first time, so you might want to consider engaging the services or advice of someone with experience. Such as your local Chartered Accountant or anyone you know whom is running a Limited company. If you're unsure as to what format to choose, speak to a solicitor or accountant who should be able to help, while a formation agent will help speed up your registration.

Alternatively, try an online registration company which will be cheaper.
  • If you're confused, speak to a solicitor or accountant 
  • A formation agent will speed up the process 
  • An online registration company will be cheaper 

You can search at the company house for available names then register a business name, or set up a company.

My personal view
I hired Chartered Accountant to do all the company registration and it save me from any difficulties with the company law and registration. He even show me the progress, what is the authorised shares, company law, read my business plan and gave me his advices which it was wonderful. 

Being a first timer, go into unknown and it will be worth it at the end. 

I sorted out with the new director's in our company recently and it all done in a day with our Chartered Accountant which it is very effective to have one. If it is just me without anyone, I would ran into difficulties and delay the progress. 

A important note, when your business making any profit, please put 25% of the profit into the business saving account for the Tax bills. The tax bill is very common reason why the business went bust.

If you have any question or need advices. Please comment :) 

Have a good day! 

Shaun

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