I do get asked a lot of questions about going Limited and the timeframes that small companies should consider and the options available to them.

For Soletrader

  • Your records are not public and your competition cannot see any financial information on you.
  • The paperwork is fairly simple to upkeep and the Self Assessment online is straight forward, which is why a lot of soletraders do their own filing.
  • Suits small companies with turnover of under £100,000 with not too many transactions and complications in their accounts.

Against Soletrader

  • Your personal assets are at risk in the event of bankruptcy or liquidation.
  • As your records are not public, your credit score is more likely to be lower than your Limited company counterparts.
  • The fact that a lot of soletraders do their own filing, eventually costs them money, as they are not necessarily aware of the tax reliefs available to them.
  • They may have a limited sales market, a lot of the larger firms will not deal with small companies under a certain size as they are more risky.
  • More likely to pay a little more tax as you pay profit on everything you earn, whether the money has been spent by the soletrader or is sitting in the bank.

For Limited

I tend to start asking my soletrader clients to at least consider investigating into going Limited once they hit the £100,000 turnover threshold. They are probably VAT registered and have staff working for them so are already used to extra regulatory paperwork anyway.

  • Increased credit score, as your records are now public record.
  • Give the impression of a profession company of a certain size. Making you more desirable to gain larger sales contracts.
  • Limited Liability, your personal assets are not at risk in a bankruptcy or liquidation, unless you have placed these assets as guarantees for the company.
  • There are better tax reliefs available as the Directors/Shareholders are a separate entity to the Company.

Against Limited

  • More regulatory paperwork, accounts need to be prepared in a certain statutory format to be accepted by Companies House. Including the preparation of a balance sheet, which a lot of soletraders do not have prepared for Self Assessment. The requirement of an annual return, corporation tax form along with the self assessment return still required for the individual director/directors.
  • There can be an increased Accountants cost for the extra paperwork required.
  • Your records public, which means anyone can see them competitors, customers and suppliers too. Small companies qualify for abbreviated accounts, which contains only limited information that is statutory, so you’re not giving away your trade secrets.
  • There is a lot more financial jargon, contained within the wording required for statutory accounts, and you have increased risk of getting fined if you are late in submitting the accounts.

We keep a great diary system, which reminds clients, when their dates for particular submissions are due which has been greatly received.

I hope you find this blog helpful in deciding your future business focus for the company.

This blog is intended for information purposes only and is only advice from past experience, you may have other suggestions of your own. It is not intended to be used to make all of your business decisions but as a guide only.

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