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Sole trader vs ltd company – advice please
Hi all I need a bit of advice this is my first month trading and things are going well so far. I’m VAT registered from July but was wondering is a sole trader the right thing to be . I make signs , do vehicle wraps etc but also do subcontract work fitting . Sorry if this comes across stupidly but I’ve got 20 years in the trade but no business knowledge as such .
Any advice on this is helpful cheers
Jon -
12 Replies
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I’m probably totally wrong but i didn’t think you could be vat registered as a sole trader
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Hmrc website guided me through the process and there was a box to tick as sole trader and I have a reg number so I imagine you can as it hasn’t raised any emails from them . I’ll double check to make sure though.
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you can be registered for vat as a sole trader, I have been for 12 years
you are going to need an accountant so why not ask they for advice. Start off sole Trader for the first year then go limited. Will depends on your turnover and what benefits you more, hard to tell at the start
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Same as Chris, sole trader & VAT registered – you have to go VAT registered if your turnover in 12 months is going to be £81k or more (you can also go VAT registered voluntarily)
You’ll need to speak to an accountant about going limited, there’d pros & cons, it all depends on your situation.
As a sole trader you are the business, any income goes directly to you, and as such you pay the tax and are responsibly personally for any debts etc.
As a Limited company, the company is now an entity on its own, has legal protection & reasonability (you’re now an employee! okay, sole shareholder or director) – there are tax advantages of low salary / high dividend, but your need to balance this against the other aspects, increased paperwork (paperwork must now be watertight!), increased accountant costs, Directors duties, other legal requirements.
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Thanks for the advice everyone I’ll speak to my accountant to see what’s best for me although having the business grow as a seperate entity does sound the right thing to do . Cheers
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I was a sole trader until a company threatened to sue me over graphics failing on vehicles, they wanted to recall 150 vehicles at my expense, my solicitor told me if this goes to court I will loose my house, go limited for peace of mind, but the are pro and cons to it so yes speak to your accountant first (it didnt go to court, i still have my house)
Gary
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SPEAK TO AN ACCOUNTANT.
Going limited to protect yourself isn’t always the best idea.As far as I understand it:
Sole trader, your first 10k profit is not taxable (current rules, your first 10k income is not taxed). You take drawings from a sole trader company, not a wage. What ever drawings you take are still classed as profit.
Limited, you pay tax on all of your profits, however, you could pay yourself 10k as a salary tax free thus reducing your profit & corporation tax, and then take dividends on top of that which you pay less tax on, and there’s also the consideration of a directors loan account which you can draw off tax free, depending what money/assets you have taken into the business.
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Have to agree speak to an accountant.
I pay mine a set fee each month and he handles my VAT, TAX, NI, PAYE etc etc….Any issues i just call him and let me get on with it.
Its worth having someone who is good and know there stuff…..I recently had full VAT investigation…Stressful tim but the accountant was as cool as a cucumber he had it all under control….Took hi, 2 months to resolve but all good.
Not sure If I’m allowed to post his details here…..
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If you use a Charted Accountant – much less likely to be investigated.
Personally due to my business setup, sole trader works better for me, But my wife is a Limited Company due to nature of her business.
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Cheers guys I’m speaking to my accountant next week I just wanted an overall pros cons before I went which seems to go either way I shall see what she says .
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quote James Sahota:Have to agree speak to an accountant.I pay mine a set fee each month and he handles my VAT, TAX, NI, PAYE etc etc….Any issues i just call him and let me get on with it.
Its worth having someone who is good and know there stuff…..I recently had full VAT investigation…Stressful tim but the accountant was as cool as a cucumber he had it all under control….Took hi, 2 months to resolve but all good.
Not sure If I’m allowed to post his details here…..
Hi James,
You can recommend anyone that is not directly associated with you or your company.
regards,
Chris -
im registered as a sole trader think its more managable if your a one man show? but thats on advice of my accountant. i think its best for first year especially until you can gauge the turnover,
form what i know limited can protect you but in my opinion its relatively cheap to get up and running ( compared to some business types) so losses shouldnt be too substantial if you have to bail out,
just my understanding off it all anyway and my 2 bobs worth.
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