Entrepreneurs setting up companies in the UK have a dilemma. They may register as sole traders or become directors of limited companies. Aside from involving different authorities (Companies House and HMRC), these formation types have taxation and liability differences. Which to choose in 2022?
Thanks to remote UK company registration services, business registration is a breeze for residents and non-residents alike. You can delegate paperwork to an agent and get the result in around 5 business days. Services for limited companies also include a business bank account and an app. Here is why an Ltd. could be the best choice for your enterprise:
The biggest argument against becoming a sole trader is personal liability. If your business goes under, your personal assets like real estate and vehicles may be used to cover its debts. In a limited company, personal and corporate funds are completely separate.
What’s more, the owner of a limited company may also act as its only director and shareholder. Registration through an agent is quick and simple: they will submit your application to Companies House, set up a business bank account, and provide an app for cash flow management.
Sole traders only need to register with HMRC. This means their companies do not appear on the Companies House database. Taxation is also simple as only the annual Self Assessment tax return is required. The drawbacks are:
Reflecting on such things can also help you when the firm is going through a crisis.
Even if a limited company files for bankruptcy, its owner may not be held personally liable. Their assets are protected. The only money they can lose is the amount they invested in the business. Other advantages include:
The biggest problem with Ltd. is the need to comply with requirements for incorporated businesses. These include:
Unless you enlist the help of an agent, registration will involve a substantial amount of paperwork. Mistakes in applications lead to delays. Finally, your business name will show up on the official database, so you will not enjoy the same privacy as sole traders.
If you want to protect your personal assets and company name, set up a limited company. This model will bring tax savings in the long run, and you can also become the only director, owner, and shareholder of your business. Remote services are quick and hassle-free. Register your company name and set up a bank account in a week!