Limited company vs Sole trader. What's the difference?
The most popular business structures in the UK are sole traders and limited companies . When starting a business, great consideration is required when deciding on what business structure to choose.
As a sole trader, you are:
- to register with HM Revenue and Customs (HMRC)
- to keep all your company's profits once you've paid tax on them
- responsible for any losses your business makes
- required to file tax returns
- required to pay income tax and national insurance
- not liable to pay accounts like a UK company
As a limited company, you need:
- directors and shareholders or members
- to be registered with Companies House and HMRC
- to have a registered office address
- to file annual accounts and confirmation statements
- to pay corporation tax and tax returns, and you can
- potentially can save more tax than a sole trader
Please note, this article is an overview and so we recommend you to seek professional advice before starting a business.