should I be a sole trader or limited company

Should You Be a Sole Trader or a Limited Business?

When staring up your new business venture, asking yourself ‘should I be a sole trader or limited company?” is a very important question. Determining where your business stands in legal terms, the kind of tax that applies to it and what your responsibilities are regarding record-keeping and reporting are all important parts to consider.

There are several structures to look at, each with advantages and disadvantages to weigh your options. Let’s take a look at both.

Sole Trader or Limited – Which is Ideal?

Choosing to operate as a sole trader or a limited company is not necessarily an easy decision to make. There are considerations around the plans for your business and the tax implications of making that choice.

Whilst you can change the structure of an existing business as they get bigger and more complex, it is still best to have everything to plan in choosing the ideal structure from the get-go.

Sole Trading

Working as a sole trader is a simple business structure where all you need to do is start trading and your business and personal finances remain the same, entitling you to all of the profits your business makes as your income. This makes admin easy as doing your self-assessment each year and paying your tax. This means you can either keep your records or hire bookkeeping services to help you which can be claimed as a business expense.

The downside is that you will not have any protection on the business’s financial side, as you will be fully responsible for any debts your business builds and face the loss of personal assets or reaching a state of bankruptcy if things go badly wrong.

Limited Company

Filing as a limited company does provide an advantage as you do have a legal separation from your business. As a limited company operates as a separate entity legally, it has its income and debts. As HMRC do not see you as your company, even if you are the only person working within it, you will be classed as an owner and employee.

This protects you personally if your company faces financial difficulty, with less risk of you losing your home or possessions in a worst-case scenario. The main disadvantage lies in the larger complexity around a limited company, and its required admin is a big part of it.

There is a lot more responsibility around learning how a business is run, and an added responsibility on keeping your various records and accounts in order – which can be a full-time job in itself. Most limited companies use bookkeeping services in Manchester to help keep their books and accounts running smoothly so that they can focus on growing the business.

For information on keeping your books and accounts for sole traders and limited companies, contact the team at Pebbles Bookkeeping today.

Don't just take our word for it...

Steve Tanswell, Manchester Facades

I changed book-keepers around a year ago because of a disagreement.  I employed Diane of Pebbles and having been with the same firm for 10 years, I was amazed by how easy working with Diane was.  Not only did the change save me money but also saved me time.  Utilising new technologies (to me) have massively improved the amount of money I can claim back in VAT and has made the whole process speedier and well as easier.  Even when Diane is chasing me for information she does in a friendly professional manner.  I’m thrilled to be working with her and would recommend her to anyone.

Mark Gray, Taylor Made Finance Ltd

“Pebbles Bookkeeping have been doing our bookkeeping for the past 2 years. Our Accountant recommended them to us and they are very professional, approachable and knowledgeble in the work they do. We send them our paperwork electronically and manually and they process it all efficiently in a timely manner.

I would not hesitate to recommend Sean and the team at Pebbles Bookkeeping – they do a fantastic job.”
Wayne Dinning, Managing Director, SD Waste Paper Limited

Diane has been providing her services to my company for approximately 6 months now and I can honestly say that due to her assistance, my company is running a lot more smoothly than it has at any time over the previous 30 years that it has existed.

I would just like to say that I would recommend her services to any business, whatever the size, as I can only see that her services would be beneficial to any company that may choose to employ her services.

Anne-Marie Armstrong, Amberry Marketing

I just wanted to thank you both for the help you’ve given me thus far in setting up my new cloud-based bookkeeping system ‘Clearbooks’.

Having used Microsoft Excel for more years than I care to admit, I had more than a few reservations when considering changing the way I managed my books, yet understood that I had to make the change sooner or later.

After an intense training session with Sean, (where I probably asked 101 questions), my fears quickly dissipated and I can honestly say that although it’s likely to take me a little while to really get to grips with the new interface, I’ve no doubt that this simple system will save me so much time and hassle in future.

And less time spent doing my books, almost certainly means more time with the family and an end to rushing around like a mad woman at quarter-end!

Thanks again and I’m looking forward to working with you again soon.

Steve Price, BWP Inspire

“We have now been working alongside you with various clients. In some cases, we have introduced you to our clients and in other cases you have worked as part of our team. Every time we have brought you in you have done a great job. We now see you as an extended part of our team. You have proved to be professional, flexible and above all competent in getting the work done. We would not have any hesitation in recommending you again, and we look forward to working with you more in the future.”