Sole trader V Ltd Co status

[polo1]

Apologies if I have posted this in the wrong place :bucktooth:

I'm interested if any of the forum members have direct experience in choosing one trading status over the other - i.e. sole trader versus limited company. Most advisors appear to suggest going down the Ltd Co route (though I suspect this is often because they hope to get more in fees from you over time!). Hence, why I am seeking some feedback from those with direct experience. Sorry it's a bit off topic from the normal technical queries, but I would value hearing of your own experience in this area.

Regards.

PS Sorry Mods, just noticed the Business Related section!

 

[Octopus]

Are you a Sole Trader? Is your turnover less than £77K?

If the answer is yes to both then you'll be better off staying a sole trader.

If your NET profit exceeds £30K per year, then Ltd starts to make sense

 

[polo1]

Thanks Murdoch. What's the relevance of the £77k & £30K figures?

Also, I'm interested in any non financial benifits/drawbacks.

Regards

 

[Octopus]

£77K means you are in mandatory VAT territory, and the £30K NET profit is where the extra costs of being limited are offset by the saving on the way you pay yourself a small salary PLUS dividends and not just a salary. A sole trader is taxed as per PAYE on all the NET profit.

 

[imago]

My experience and advice as given by my accountant, is to start out as a sole trader. Then when/if you hit the VAT registration threshold change to a Ltd Co and register for VAT.

It keeps things simple in the beginning, and you only change status when you need to, and if your turnover is at that level, can afford to. Change to a Ltd Co is simple, changing from one isn't, so it's a logical (and normal as far as HMRC are concerned) progression from sole trader to Ltd Co.

 

[Octopus]

And if you're registered with one of the SCAM Part P scheme's and want to change from Sole Trader to Ltd some charge for the "admin"

 

[sedgy34]

this all depends on what your work circumstances are.

 

[Englishsparks]

Also with a Ltd comapany you are limiting your liabilities.

For example if you go T-ts up your creditors can only go after the assets in the business, unlike sole trader thay can go after all your assets, this includes your house.
This is the same for a lot of things as the trading title says you are limiting your liabilites

P.S I am no way saying that you or any one else will go or should go t-ts up

 

[sedgy34]

And if you're registered with one of the SCAM Part P scheme's and want to change from Sole Trader to Ltd some charge for the "admin"

Yes there is lol only for those who don't challenge it

 

[netblindpaul]

Ltd. defo, if you are playing with £multiM of m/c's or premises, say, & things go wrong, Ltd. Co. assets only up for grabs, that way you keep your house, car, personal possessions etc.
Plus if the "company" goes wrong, & you have employees, you can wind the company up in a few hours, lay off apprentices, employees etc. easily.
For me no brainer.

 

[maper1]

We opted to go to Ltd early on as most of our work is business to business and a lot of larger companies sometimes prefer to work with more established suppliers. Therefore being Ltd can be an advantage. Same is true for VAT registration some larger companies expect you to be registered, although I appreciate if you are below the vat threshold for registration it would push up the price when dealing with consumers rather than businesses.

 

[polo1]

Thanks to everyone who has replied - all interesting stuff. This might be a daft question, but am I correct in assuming that a sole trader can't employ someone i.e. paye, or does it have to be as a sub contractor.

And for the avoidance of doubt, I'm not being lazy expecting you guys to do all the work for me. I have done a fair bit of research, but have had contradictory advice - hence I was looking for advice from those with real world experience at the sharp end!

Regards.