Sole traders

Being your own boss may sound like a wonderful idea, but things are never as easy as we’d like. For example what about all that financial compliance and tax stuff your current boss has to deal with? How much of it will you need to do, and what could happen if you don’t? Plus are you really sure you want to stay a Sole Trader and not start up your own company (Ltd)?

What are the differences between a Sole Trader and a Limited Company?

• Operating as a sole trader carries a greater personal financial liability than being Director of a limited company. You are personally liable for the businesses debts.

The main, and probably most important, difference is in terms of loans and debts. As a Sole Trader any debts you accumulate will be under your name, and therefore you will need to pay off those loans and debts accordingly. This may result in a 3 day caravan holiday in Devon, instead of a 2 week holiday in the Seychelles (guess which one your family would prefer).

Whereas a Limited Company is an entity in its own right, Officers of the company do have certain responsibilities to run the company correctly and personally have a legal liability if they don’t. In addition to this, most lenders expect a personal Guarantee from a director if they lend funds to a company, therefore giving personal financial risk to the director.

Also the legal forms and registration is lengthier and more time consuming for an Ltd company than for a Sole Trader.

However to find the best fit for you, in terms of whether you should be a Sole Trader of a Ltd Company, we highly recommend you speak to your solicitor and bank manger to find the best solution for you.

• Operating as a sole trader is cheaper than registering as a limited company and the admin burden is also lighter as a sole trader

That being said unless you employ someone else to do the admin you’ll most likely be giving up a lot of your free time, say goodbye to Sunday BBQ’s and hello to late night’s filled with paper work.
Everyone’s idea of fun…right?

Book keeping & accountancy support can help you with record keeping, legal compliance and the correct procedure for filing tax returns and paying tax. This is a cost to your business, but you should consider how much time you can and will spend on bookkeeping and accounting. Will it be better to do it yourself or to stick to what you love and outsourcing the accounting and book keeping to experts?

What services can Team 4 provide to support Sole Traders?
Payroll & Automatic Enrolment
Management Accounting Services
• We’re not just bookkeepers, as we also provide Out Sourced Accounts Services

Any questions? We know finance for your business can be daunting so please just get in touch and ask us for some friendly advice:

Claire Packham –
Lisa Walkden –
Or call us on: 01825 763378



Look out for the second part: tax obligations for Sole Traders and what you should be finically aware of!

Categories: Team4 News