Sole trader or Limited Company

Should I set up as a sole trader or form a Limited Company?

There are a variety of ways in which you can structure your business. The four common ones are Sole Trader, Partnership, Limited Company or a Limited Liability Partnership. Each has its pros and cons, costs and benefits.

The simplest form is to become a Sole Trader, the costs associated with running this are the lowest of the four options. It is normally the pragmatic option for profits of under £30,000, but the major drawback being that your personal assets are at risk if the business fails.

A Partnership or Limited Liability Partnership (LLP) is a useful structure to use when there is uncertainty over what each Partners contribution is to the profits of the business. The split of partnership profits can be decided between the Partners. There is no shareholding requirement to pay in proportion to the shares held.

With a Limited Company, the main benefit is limited liability which means that providing you comply with the Companies Act your personal assets are not at risk. You can also structure the business to make the best use of your tax allowances.

It is worth noting that often the only structure that larger companies will deal with is limited companies.

There are drawbacks when you go from being employed to becoming a business owner, one being the loss of a steady income from employment. This may make it more difficult to obtain mortgages and loans from the high street lenders. This can be the case but there are lenders out there who specialise in Freelancer and Contractors who will be able to help.

Freelancer Accounting is a specialist provider of fixed fee accountancy services to freelancers and contractors in London and South East England.

We understand that tax is complicated and offer you face to face meetings at one of our office locations convenient to you.

You have your own dedicated accountant as a point of contact.

We are accredited by the Professional Contractors Group (PCG) and are an ACCA Practice, so you never have to worry about you tax and accounting affairs again.

If you are thinking of contracting or an existing contractor with questions and would like further advice, please do not hesitate to call your local FreelancerAccounting office on 0800 1357157 or email martyn@freelanceraccounting.com