Sole trader vs. Limited company: Pros and Cons

What’s a sole trader?

A person that’s self-employed and NOT separate from their business.

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Sole trader: the benefits

• Simpler to set up and less admin than a limited company.
• Your income is private between you and HMRC.
• If low profits, it's more tax efficient.

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Sole trader: the drawbacks

• The owner is the business, so you’re personally responsible for debts.
• If higher profits, you’ll pay more taxes.
• Can only be one owner of the business.

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What’s a limited company?

A registered business that’s treated separately to the owners.

Limited company: the benefits

• You’re not personally responsible for debts.
• If higher profits, it’s more tax efficient.
• Easy to sell part of business to others.

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Limited company: the drawbacks

• More admin such as company filing, accounting, taxes, etc.
• Financial information published publicly.
• You don’t have direct access to profits – it needs to be taken as dividends.