Sole Trader vs Limited Company
Should I incorporate or operate as a Sole Trader? The main differences between the two are;
Things to consider……
Consider your expected level of income - how much will you pay yourself?
This is important because the level of income will determine the tax rate you will pay. As a Sole Trader, all profits are taxed up to 55%. As a Limited Company, only your salary will be taxed as an employee (up to 55%) not all the profits.
As mentioned above, as a Sole Trader, all profits are taxed at income tax rates but as a Limited you are likely to pay Corporation Tax at 12.5%.
What does the future look like?
In many cases, registering as a Sole Trader is a suitable and even, an ideal option. It is easy to set up and close down, you can set it up as a side-hustle alongside your 9-5 job, and you can have peace of mind that your Revenue responsibilities generally don’t change. However, if you have plans for growth, building a brand, or plan on creating a business that will still be around for future generations, then registering as a Limited Company is the clear option for you.
If you are working in an industry that has a higher risk of you getting sued for damages due to error, setting up a Limited Company might be the safest bet for you.
Limited Companies have more red tape!
Keeping your company compliant with all the relevant rules and regulations is a lot of work. Make sure you have a company secretary who is aware of these various laws. Alternatively, let us be your company secretary and look after the compliance for your company.