Sole Trader or Limited Company: Which business structure is best for you?
The answer has implications beyond those relating to tax and depends on your situation. This decision has become even more crucial with the change of taxation of dividends from 2016/17 onwards. If you expect profits to exceed approximately £30k pa, it may be more tax efficient to trade as a limited company. However, a limited company requires additional volumes of paperwork and there are more rules and regulations. Sole trader status is relatively uncomplicated, and can be the best choice for smaller or short term ventures.
There are benefits to operating under a limited company, particularly for contractors. Often clients and agencies will not engage with sole traders, whereas company status can attract bigger clients and provide credibility. Your personal assets are protected so for those in higher risk industries this can be attractive.
To help you achieve the right structure, we can review your financial position and help explain all the issues to ensure your business is tailored to your specific circumstances. And remember, your decision isn’t final so if your business plan changes, so can your trading structure.