Should I become a Limited Company?

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Should I become a Limited Company?

SoleTrader ->>> Limited Company

Thinking about becoming a Limited company? Wondering what the benefits are if you make the change from a sole-trader?

Here are 5 top reasons how becoming a Limited company can have a positive effect on your business.

Limited Liability

Sole Traders have an unlimited liability as the individual and the company is not is viewed as a separate entity in UK law. This means if the business gets into debt, the business owner is personally liable.

As such, sole traders could lose personal assets if things were to go wrong. With a limited company you only stand to loose what you put into the company as well as any Directors Guarantee agreements you sign up to.

Raise Funding

Raising Finance can be difficult if a sole trader especially in the current climate. Banks and other lenders tend to prefer limited companies, thus limiting the expansion of sole traders e.g buying a new van, machinery, tools.

Be aware that most lenders prefer to see 2-3 years of financial accounts.

Tax Rates

Tax rates on limited companies are usually more favourable to limited companies rather sole traders. Dependant on your plans for growth and earnings it may not be as lucrative to stay as a sole trader.

As a Sole trader you will be charged tax on your full income, but as a director and shareholder of a Limited company

you may choose to take a small salary and draw further income as dividends. Dividends are not subject to National Insurance Contributions.

Therefore running your business as a limited company could mean you take home more of your earnings.


As a sole trader you are unable to stop other people use the same name and this could damage your business.

Changing to a limited company protects your chosen name by law and ensures only you have that name of your business.

Professional Status

In some businesses and industries, having a limited company can provide a more professional image. If you do business with other companies they may prefer to only deal with limited companies rather sole traders.


If you have decided to make the move or simply want to protect your name, then we have a fast and cost effective service for you under our Company Formations services.


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