Sole Trader or Limited Company
Are you considering a sole trader or limited company registration? Not sure which one to go for? We can guide you through it. Sole trader or limited company registrations are very different not only from an administrative approach, but also from a legal perspective.
Differences between the two are many. These two registrations are fundamentally different and the right choice for you comes down to many factors. One area that would need to be looked at is your tax compliance and a tax advisors advice would need to be sought first. We can advise with you here if necessary and have access to Certified Tax advisors who can help you. Planning now can save you a lot of heartache in the future.
The entities only differ from a company formation process but are two different entities entirely. The main difference is Limited Liability which a company is given through the companies act 2014. This states that the individuals involved in the company are separate to the company, and not the same. With a Sole trader, if the business over trades for example, and has liabilities, then entities that are owed funds by the business can peruse the Sole Traders assets. This is not the case with a Company as the liabilities are limited to what’s invested by the Directors and Shareholders.
Considerations to be a Sole Trader
If you are planning to be a small operation where one person is the operator and the skillset then this may be for you. It is simple and cheap to register and you can do it directly with the CRO. There are no annual returns to perform and it is cheap to close. Most importantly there is no Limited Liability. This is the one biggest disadvantage.
Considerations for a limited company
Shareholders are defined in the constitution of the company. They are not with a partnership registration. The company is covered by limited liability, as explained above, this is crucial for anyone making investments in the company. The company is exposed to 12.5% corporation tax on profits, this is not the case with a Sole trader or partnership registration.
A limited company will be more credible when it comes to third parties doing due diligence for investment opportunities. The limited company name is also protected. No one else can register a limited company name that is already registered. There are other protections within the registration process also.
Not only are there clearly defined owners, but also roles within the company. Officers of a company have clearly defined roles under the law.