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  • Writer's pictureMatt James

Sole trader or LTD? (The best advice for new start-ups)

As a start-up business, you will have a lot of complex decisions to make right from the get-go, including choosing the best formation for your company.

The decision between operating as a sole trader or a limited company can be a difficult one. Both have their benefits, so it’s important to consider all the factors before making a decision.

As a sole trader, you have complete control over your business. You are solely responsible for its success or failure, and you can make decisions quickly and easily without involving other people.

You can also keep your business small and flexible, which means you don’t have to worry about complex regulations or paperwork. On the other hand, if you opt for the limited company structure, you’ll be able to take advantage of the limited liability that it offers. This means that your personal assets are protected from any debts or legal action that your business may incur.

Additionally, as a limited company, you’ll be able to attract investors and take advantage of more tax efficient ways of doing business.

Whichever option you choose, it’s important to be aware of the pros and cons of both. Ultimately, the best choice will depend on your individual circumstances and goals.

What's the difference?

A sole trader is an individual business owner who has complete responsibility for their company's operations. There are many misconceptions that sole traders have to be a single-person business, however, this is untrue, you can hire staff, but only you own and control your business. Advantages-

  • You get to keep 100% of your after-tax profits

  • Easiest way to get started with fewer rules and regulations to be aware of

  • You make all the decisions!

  • Less admin involved compared to running a Limited Company

  • You can give your clients a personal touch since you will be dealing directly


  • 100% liability for your business' debt

  • Long hours as you're filling the shoes of many different people

  • Much more challenging to raise funding as a sole trader

  • Limited scope for expansion with management limitations

A Limited Company (or Ltd) is a private company usually consisting of multiple owners. While LTDs are typically owned by multiple people, this isn't a legal requirement. One person can be the Director of a Limited Company, still retaining the benefits of being 'separate' from the business.


  • You can be more tax efficient paying yourself with dividends and salary

  • Easier to leave with more of a 'clean break' compared to other structures

  • Losses and debt aren't personal, they are against the Company

  • You have some legal protection personally, as you are a separate entity


  • If you own a Ltd Company, you must prepare annual accounts

  • More financial admin, you'll need to be compliant with make tax digital

  • Your company has less privacy as parts are published with Companies House

  • Taxation rules are a lot more rigid

If you would like any start-up advice for your new business check out our Start-up page or get in touch here:

0333 335 5137

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