UK Company Registration – Is Ltd. or Sole Trader is better?

An entrepreneur who registers a business in the UK can become a sole trader or a director of a private limited company. Which structure is best in terms of taxation and liability? Find out in our short guide to making business registration easier in 2022.

Any UK resident or non-resident can set up a business in the country. The most convenient way is to go through Registration of the LLC company in line. First, the agent takes care of all the paperwork on your behalf. Second, you get a business account and app for free. Here’s how your options compare.

Personal responsibility

The personal assets of sole traders are not separated from the finances of their business. If something goes wrong with the company, they are held legally responsible. Their personal assets can be used to cover business debts.

This does not happen with Ltd. entity owners, as the personal and corporate dimensions are independent. A public limited company can be managed and owned by a single person (director/shareholder). It must also be registered with Companies House.

Sole proprietorship: advantages

  • This legal structure is the simplest, so it minimizes paperwork. Only the annual self-assessment tax return needs to be submitted and registration with Companies House is not required.
  • The lack of incorporation means you can enjoy greater privacy, as your business does not appear in the database.

Sole Proprietorship: Disadvantages

  • Liability is unlimited, so your personal assets may be at risk if the business goes into debt;
  • Raising capital is harder because private investors and institutions are wary of individual traders.
  • As soon as you reach a certain level of profitability, you pay more taxes than an LLC. Thus, this model is less fiscally advantageous.
  • Sole traders have no protection if another business uses their name.

Public limited company: Advantages

  • The owner has only limited personal liability. Their finances are separated from the financial flows of companies. Even in the event of bankruptcy, personal assets remain unexposed and losses are limited to the amount invested in the business.
  • As Companies House has strict business name requirements, you can be sure that no other company can have a name that closely resembles yours. It is also possible to register the trademark as a trademark.
  • Instead of income tax, you will pay corporation tax on profits. This will make your business more tax efficient.
  • You can claim more allowances and tax-deductible costs on your profits.

Public limited company: Disadvantages

Ltd companies. being officially constituted, they must comply with specific requirements:

  • the fiduciary responsibilities of the director,
  • file an annual corporation tax return,
  • annual accounts.

In addition, company information is stored in the official database (Companies House), so it is publicly available. Finally, registration requires a significant amount of paperwork unless you hire an experienced agent.

to summarize

The Structure Ltd. has more advantages over the sole proprietorship model. It is more tax efficient and protects your assets in case your business underperforms. As an entrepreneur, you can be the sole director, owner and shareholder. Although registration with Companies House is mandatory, a professional agent will help you save time, money and effort.

About Leah Albert

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