Limited Company vs Sole Traders in the UK

People have taken a keen interest in Company Formation in the UK, as they establish new companies and start their businesses. However, one common question that they ask is about registering their companies as Limited Company vs Sole Traders. Here in this article, we shall explore both types of companies, understand the difference between the two and decide which company is better?

In Sole Traders’ legal structure, the business is owned by the owner, and both the business owner and the business are classified as a single entity. On the other hand, a limited company treats business and the business owners/shareholders as separate entities, managing the business separately.

Here are the key differences between Sole Traders and Limited Company type of Business structures in UK.

Liabilities in the case of Limited Company vs Sole Traders:

In the case of limited companies, you only have limited liabilities which cannot be more than your company share. Therefore, the liabilities are limited by the shares in a limited company type structure of a company.

On the other hand, in a Sole Trader Type of business structure, both the business owner and business are pretty much the same. One man is in charge of all the affairs and is held responsible for all the liabilities. This means that all the company loans become your personal loans and likewise. It is impossible to draw any distinctions between the two. As a result, all your personal assets are also assets of the company. These can further be used to clear out the loans. Therefore, your very personal belongings are not protected.

Taxation:

In limited companies, the taxes are deducted from the salaries of the directors. Following that, these taxes are paid to the HMRC department. The standard tax deduction for a limited company is about 19%.

In the case of sole traders, they have to pay the taxes on their revenues through the Self-assessment tax return system. This can vary from 25% to 45%.

Accounts:

The limited companies maintain their regular accounts and submit their account statements and account record by the end of the year.

On the contrary, Sole Traders do not have to maintain regular accounts for submission. However, they still should have a clear record of incomes and payments for tax returns.

It depends upon your needs and revenues to choose the legal structure of the Company in the UK. For the registration of both Sole Trader and Limited type Company, you may contact Liscard Business Centre for discounted offers and fast results.

Liscard Business Centre

Liscard Business Centre is a company formation service that offers different packages for company formation in UK. If you want to register your businesses anywhere in the UK (that includes England, Scotland, Wales, and Northern Ireland). Liscard Business Centre would love to help. We can help you in forming your companies in much shorter periods of time while also saving you considerable sums of money.

Registration, Documents Verification, Banking Details, Statements of Association, and Official Addresses are all managed by Liscard Business Centre.

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