Self Employed VS Limited Company

When starting a business, it’s important that you select the right structure, which can significantly impact your operations, taxes, and liability.
Two common options are sole trader and limited company – here’s a simplified comparison:

Ownership
Sole Trader: You have complete control over decision-making.
Limited Company: Ownership is divided into shares held by shareholders – you can be the sole shareholder or share ownership with others.

Liability
Sole Trader: You’re personally responsible for all aspects of the business, including its debts and legal obligations. This means your personal assets could be at risk if the business faces financial difficulties.
Limited Company: Shareholder’s liability is generally limited to the amount they’ve invested in the company, your personal assets are typically protected from business debts.

Taxation
Sole Trader: Your business income is taxed as part of your personal income, you’ll pay income tax and national insurance on your profits.
Limited Company: Subject to Corporation Tax on profits. If you take money out of the company as dividends, you may also be liable for personal income tax.

Regulations
Sole Trader: Generally, face fewer regulatory requirements, but still need to register for certain licenses or permits depending on the business activities.
Limited Company: Have more regulatory and compliance obligations. This includes filing annual accounts, maintaining statuary records and complying with company law regulations.

The choice between a sole trader and a limited company depends on factors such as personal liability, tolerance, tax considerations, and regulatory preferences. Consulting with a professional can help you make an informed decision based on your specific circumstances.