A limited company is different from a Sole Trader. It is a separate legal entity and is completely independent of the owners and shareholders etc. It can enter into contracts and be solely responsible for its own actions. Any claims against the company can be made against the company assets. A Sole Trader is personally responsible for claims against their business.
It can be run by a single person even with no employees or shareholders and is still regarded as a separate entity. A limited company must be registered with Companies House.
A limited company can be listed ad ‘Limited by shares’ or ‘Limited by Guarantee’. Each has its own set of regulations and responsibilities beyond the scope of this post and I will cover it further in later blog posts. However, please click the image below to read what HMRC has to say.
- A separate legal entity from an individual
- Any claims against the company are settled by company assets
- Personal assets are safe
- Corporation Tax is at a lower level than personal income tax
- Access to better tax planning
- Must be over 16
- Must have no history of bankruptcy
- Must have no legal reasons for setting up as a company director
- The business name must not be in use anywhere else
- Must register with Companies House
- Company information is available to the public
- The higher cost of maintaining the business both financially and in time
- Additional reports and accounts are registered each year
- Additional responsibilities to Companies House
This is an area that has to be investigated thoroughly before making the decision between a sole trader or a limited company. Let us help you decide by contacting us for advice.