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There is a lot of information out there today about how a limited company is always the best structure for your business and sole trader isn’t. Each has their owns pros and cons.
For example trading as a sole trader, there is less regulation to comply with and your business accounts do not have to be filed publically with Companies House whereas with a Limited Company there is more regulation and you have to file your Accounts annually to Companies House which is a publically available register.
With a sole trader set up, there is less adminstration involved meaning less professional costs involved, in contrast with a Limited Company which can end up being more time consuming with Confirmation Statements, Statutory Accounts and CT600’s all needing to be filed on a yearly basis.
WIth a limited company structure, all your profits are taxed at 19%, soon to be 17% from 1st April 2020 and you can play around with your remuneration scheme a lot more by taking a mixture of salary and dividends to suit your needs.
As a sole trader, your profits are taxed using income rate tax bands, meaning you could be pushed up into the 40% tax rate band very easily if you have other income from rental properties and other employments.
There are also other benefits to a limited company such as the credibility to customers if they see you are a limited company, the ability to raise finance with lending instituations and limited liability on directors.
Despite all of this, trading as a sole trader still does have its benefits compared to a limited company structure but it really depends on your individual situation and how you are looking to run your business and extract money from it.
Get in touch with us at M Raza & Co to see what company structure suits you best on 02920 616 986 or use the contact form to get in touch with us.
DISCLAIMER:
The information provided on this web site is of a general nature. It is not a substitute for specific advice in your own circumstances. You are recommended to obtain specific professional advice from a professional accountant before you take any action or refrain from action. Whilst we endeavour to use reasonable efforts to furnish accurate, complete, reliable, error free and up-to-date information, we do not warrant that it is such. We and our associates disclaim all warranties. The information can only provide an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice.
