Limited company vs sole trader: what’s best for you?

by | Jul 27, 2023

It’s a question we get asked often: “limited company vs sole trader – which is best for my business?”

The thing is, the answer varies depending on the type of business you run, how it operates, and what your plans are for the future.

We’re here to help you make an informed decision, and determine the best possible business structure for you.

Limited company vs sole trader: the basics

It will come as no surprise to most that there are a fair number of differences between the two business structures. In our previous article, we covered the tax treatments of both. This time around, we’ll look at a few other factors.

But let’s start at the beginning.

As a sole trader, you are your business. You’re the one responsible for all aspects of the day-to-day finances, including profit, losses and debt.

With a limited company, you have more separation between your own finances and the business’s, because the company is a separate legal entity. For this reason, your personal risk of loss, should things go downhill in the company, is limited.

Besides this, there are other, more nuanced factors to consider.

Setting up

One of the biggest differences between setting up as a limited company or a sole trader starts at the beginning.

Setting up as a sole trader is rather straightforward. As you won’t need to register with Companies House, you can start your business as soon as you want to. You’ll just need to make sure you register to file a self-assessment tax return with HMRC if your self-employment income is more than £1,000 in a tax year.

As a limited company, you will have to register with Companies House and pay a setup fee, as well as registering for corporation tax with HMRC. The admin stacks up from the get go.


When you register your limited company, you’re asked to provide a lot of information to Companies House which then goes on the public register.
That means personal information including your name, name, nationality, occupation, and the month and year of your date of birth is available to the public.

Information on the company’s ‘people with significant control’ and your registered office address is also available for anyone to see.

Sole traders have the advantage of privacy, meaning all of your information is secure.


Without the formality of a company structure, you may find it harder to gain credibility in the early stages of your career as a sole trader. There’s also less legal protection for customers when dealing with an unincorporated business.

On the other hand, as a limited company, you may be seen as more official, and because customers can find out any information they want on the business, they may feel as though they have a better insight into your inner workings.


Your decision as to whether it’s better to be a limited company or a sole trader could also be influenced by the level of control you have.

As a sole trader, you have the first and last say on any business decisions. You’re your own boss and are fully accountable (which can be a double-edged sword at times).

With limited companies, you might well be in the same position – you could be the sole director and shareholder of the company. But if you do have any other shareholders in the company, you’ll need to follow a formal procedure to confirm major decisions with the board. This could be frustrating if you don’t all see eye-to-eye, and might prolong any changes you wish to make.

The choice, ultimately, is yours

As you can tell, there are pros and cons to both limited company and sole trader structures.

It’s your business and, ultimately, your choice. But, if you’re struggling to make that decision, you can always reach out to a professional business expert who can help you weigh your options.

If you want guidance on whether you should set up as a limited company or sole trader, get in touch. We’ll be happy to discuss it with you.


Ready to connect?

If you’re curious about how we can help you, please reach out: our team is very keen to hear from you.

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