Setting up - Sole Trader vs Company
Updated: Nov 14, 2019
When you first start a business you often get asked whether you will setup a company. Many new ventures setup a company without fully calculating whether this is the right course of action. In fact, many people starting out their first business venture maybe better to focus on starting up as a sole trader.
What is a sole trader? This is where you, as a person, set up trading in your own name. The setup costs are low, maybe just a separate bank account, there are no company registration fees. Furthermore, there are fewer business regulations and laws to adhere to and you can easily change your structure, business focus or close the business if circumstances change.
A company is now very easy to setup in the UK (through Companies House - www.gov.uk) and the fees to establish the company are not expensive. Although whilst this is the case, anyone thinking about setting up a company should be aware that there are ongoing document filing requirements and the need to produce standard accounts. A company will be a separate legal entity ("a person") so will require shareholders, a legal structure and a bank account. Additionally you may need separate insurance and to meet other regulations as the company will not be the same legal person as the owner.
When starting up, it may make more sense to start as a sole trader for a period until you convert the business into a company. Whilst operating your business through a company does look more professional, it won't significantly affect how you deliver the service to your client at the end of the day but will add to the complexity of running the business.
If you would like to discuss this topic or others related to starting your own business please feel free to contact me for a free, no obligation, meeting.