How is cryptocurrency taxed in the UK?
Tags :
Latest
Share :
Sole Trader VS a Limited Company
March 12, 2022
What is the difference between Sole Trader and a Limited Company? Understanding the difference becomes important to find out which legal structure best suits your business.
Every business, regardless of small or big, needs a legal structure. You can either choose to be a sole trader, partnership, or limited company- and most among them choose to be a sole trader or a limited company.
What is a Sole trader?
A sole trader or a sole proprietorship is owned and controlled by a single owner. The sole trader is responsible for all aspects of the business, including debts and losses, and all day-to-day decision-making.
What is a Limited Company?
A limited company is a distinct company from its shareholders and directors. As a result, owners are not solely responsible for the company’s debt and liabilities, in other words, they have limited liabilities.
Sole Trader VS a Limited Company.
Speculating about the pros and cons of a sole trader and a limited company? Considering to be a sole trader or a limited company? Here’s a quick route to take you through the pros and cons of both:
Advantages of a Sole Trader:
- Easy to set up, simple registration, and comparatively less paperwork
- Enjoys the profits alone
- Greater privacy
- You have full control when it comes to decision making
Disadvantages of a Limited Company:
- Unlimited liabilities mean even a sole trader may lose even personal property if things go south.
- It may be difficult to raise finance
- Taxed as an individual so when you reach a certain amount of income, the taxes
- In case of any legal disputes, you will be sued unless you have suitable insurance.
Advantages of a Limited Company:
- A limited company is a separate entity, so the owners have limited liability
- Is tax efficient as limited companies pay flat 19% corporation tax on profits.
- Have more credibility which means more access to funds
- As a director of the company, you have higher personal remuneration as you can reduce Income Tax and NICs by the combination of salary and dividends.
Disadvantages of a Limited Company:
- The paperwork for setting up and running the business is complex.
- There is less privacy, as the accounts and documents filed with Companies House are public and can be accessed by anyone.
- There are added responsibilities of paperwork which are costly and time-consuming.
So what is the Best?
Be it a sole trader or a limited company, it comes to your personal choice, preference,
planning, and strategy, so the decision should be yours.
Have Any Question?
If it’s an urgent question or just a simple query, get in touch.