Should I be a Sole Trader or Limited Company? – Part 2

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5 non money reasons to switch to a Limited Company

Hopefully you’ve taken a look at our previous blog, discussing when, based on the money side of things, it would be a good idea for you to move your business into being a limited company. But, actually one of the biggest pitfalls in business is believing that it’s all about the money!


It’s not!


Of course, there’s a bottom line, and at the end of the day, the point of your business is to create a viable income for you, but trust us, it’s not that simple! Here are the PPF team’s top 5 non-money reasons why you should go limited!

1. No risk to your personal assets, like your house!

As a sole trader, you are the business, and the business is you! This means that if you were to fall behind, and start owing money, your personal belongings become liable … not so as a limited company! You become 2 separate entities, and so your home is always safe!


2. Easier to get funding

Depending on what your million £ idea is, you may need to secure some funding to help you along the way. It’s just a fact that banks and other lenders are much more likely to bank an established company, who has an accountant they’re working alongside, and regular accounts etc. Even if you’re not needing a major loan, this can even apply to things like securing a car lease, or premises to work from.


3. You dictate your earnings

As a sole trader, your income and expenses fall solidly between 6th-5th April each tax year, with no way to carry things over, leave some profit behind without getting taxed on it etc …

As the director of a limited company, whilst you will have annual corporation tax to pay, you can decide how much of the profits you take out of your company each year, and therefore how much tax you’ll be paying.

For example, in year 1, you spent 6 months working at your old job, and your salary has already taken you close to the threshold of starting to pay 40% tax … you can decide to leave the profits for the first year in your company, and draw them out the following year, keeping you nicely under that limit!


4. Saleability

As much as you’re obviously working THE DREAM JOB now you’re in business with yourself, you probably do have a plan to start to relax some time down the line, and enjoy some of the fruitage of your hard work.. 10, 15, 20 years down the line, your limited company is going to be much more attractive to buyers, and higher offers, then your sole-trading business.


5. Sharing the love!

A sole trader is exactly that … sole, solo, the only one … But in setting up your limited company, you can appoint your significant other, or other family members as company directors. This means you can both (or all!) take advantage of the yearly £2000 of tax-free dividends, and also the lower rate of dividend tax at 8.75% on the rest.. But we said this was non-money reasons, so instead let’s focus on how having significant others as company directors mean you can get gifts from the company! Company directors and significant family members can have tax-free gifts of up to £300 per year from the company! 


Honestly, this has taken me a grand total of about 10 minutes to write, because there are so many good reasons to go limited!

Please book in a free 15 minute Discovery Call to have a chat about whether going limited is right for you!