There are few questions that pop up more consistently in the mind of the freelancer than “should I be a Sole Trader or form a Limited Company”? The accountants for freelancers at Freelancer Accounting (http://www.freelanceraccounting.com) assist both groups in the efficient structuring and management of their tax and accounting affairs, but it’s a question that nonetheless needs to be carefully considered, given the respective advantages and disadvantages.
Different situations demand different approaches, so our accountants in Guildford would never advise you to choose one option over another unless they were convinced that it was in your own best interests. Limited Company formation, for example, may bring certain tax efficiencies, but this might not justify the move from being a Sole Trader if your earnings are still fairly low. But then again, you might like the weight that is added to your company name when you have a Limited Company formed.
With that in mind, we’ll first consider some of the benefits of remaining a Sole Trader. Life is simpler, in many ways, for Sole Traders. Although a personal self-assessment will need to be submitted to HMRC irrespective of whether you are a Sole Trader or the Director of a Limited Company, the latter will have extra paperwork to submit relating to their company, including annual accounts, the Corporation Tax return and any applicable VAT returns. That said, those operating under a Limited Company can have these extra responsibilities dealt with in a thorough and cost-effective manner by one of our capable accountants in Canary Wharf or elsewhere in London.
Certainly, a Limited Company brings a wide range of advantages of its own. For one thing, as it is a legal entity in its own right, you have an easy exit strategy if you wish to take advantage of it, selling your entire business – including such elements as your equipment and clients – as one. Your employability can also be enhanced by Limited Company formation, as some large companies will not even do business with sole traders. You also have the benefit of Limited Liability as a Limited Company Director, which means that, unless you invalidate it by acting illegally, you have protection against your personal belongings being taken if your company goes bust.
You can also be more profitable as a Limited Company Director, as well as enjoying greater borrowing power. These are aspects that we can advise you on as part of our wider accountancy services here at Freelancer Accounting (http://www.freelanceraccounting.com), helping to ensure the most appropriate management of your business affairs.