Should I set up as a Sole Trader or a Limited Company?
Answer: There are two key areas most businessmen look at when deciding on incorporation, the possible tax savings arising from incorporation and limited liability. In respect of limited liability provided any business debts are unsecured then in most situations if a business fails the owners will have no personal liability for the debts of the company. For sole traders they will be responsible for all the debts of the business. In respect of tax savings the tax advantages of incorporation depend on a lot of factors such as the likely level of profits the business will generate, the level of drawings you require from the business, your motor vehicle position, pensions, the ownership of the business, the increased costs arising from operating as a limited company compared to a sole trader and so on. Only after careful consideration of all the factors can a decision really be made as to whether a business should incorporate for tax reasons. As a general rule of thumb businesses which generate profits of between £25K to £30K upwards should investigate the possibilities of incorporation as there may be tax savings arising from trading as a limited company. The decision is complicated and the wrong decision potentially costly. We offer a FREE consultation to NEW customers, please ring us to arrange an appointment today.