If you are a sole trader or are running your own business, one of the key questions you will no doubt face at some stage is whether to work as a sole trader or trade through a limited company.

Whilst there are numerous benefits to going limited, many businesses choose the sole trader option. This is primarily because although going limited might be more financially rewarding, with lower taxes and more tax planning opportunities, they think there will be far more administration and legal commitments by going limited.

Without a doubt, as accountants, the most common question we get asked is ‘should I go limited?’ but the reality is that there is no easy answer.

Everyone’s situation is different and what’s right for one person might not be right for another. As well as the obvious issues of tax and national insurance contributions, there are many other factors, which might influence your decision, for example:

  • What your turnover is and how much profit you make
  • Your future plans to grow the business
  • What level of commercial risk you will be exposed to
  • Whether customer perception matters
  • What plans you have, or would like, for pensions and retirement
  • Do you intend to sell your business in the future
  • Do you have the time to manage a limited company
  • Reducing your tax bill vs extra time working on, and not in, your business

So, there are lots of things to think about, and most important of all is your own personal preference. You might want the simplicity of being a sole trader rather than a limited company, or you might prefer the security of having ‘limited liability’. In order to make that decision, you must have all the information at your fingertips, which is where we can help.

The Pros & Cons

As with all major business decisions, there are pros and cons to each option. Below, we’ve put together some of the key advantages and disadvantages of trading as a sole trader, rather than through a limited company:

Sole trader/ self-employed – ‘more simple’ and an easy way to start in business


  • No setup costs
  • No limited company formation fees
  • Cheaper accountancy fees
  • Fewer government departments to liaise with
  • Just submit a tax return once a year
  • The usual route most people take when just starting out


  • Higher personal risk – you will be personally responsible for the company’s debts, so your personal assets can be at risk
  • Fewer opportunities for tax planning

Limited company – ‘slightly more complicated’, but necessary for some!


  • You are separate from the company, so your personal possessions may not be at risk, unlike if you’re self-employed
  • You may appear to be a little more professional
  • Better tax planning opportunities
  • Some customers, usually PLCs or larger limited companies, will only work with other limited companies


  • More costly starting up as you will have to pay to form a Limited Company
  • You have to file your accounts at Companies House each year, which will be on public record
  • You also have to file accounts, company tax and corporation tax calculations with HM Revenue and Customs every year
  • Accountancy fees are generally more expensive
If you wish to find out more about which option might be best for you, why not contact us now by clicking here.
Or call Richard on 07970 298253.  Our advice is friendly and FREE!