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Sole trader or LTD


NorfolkAYA
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I run a LTD... Pros are various:

+ Ability to deal with VAT with the simplified skim, or not. (be careful with the simplified skim if you want to invoice outside the EU!)

+ More 'serious' look when dealing with other corporations

+ Dividends are /still/ more interesting than the PAYE breakdown.

+ Ability to sub-contract stuff and act as an agent.

+ Etc

Downside are:

+ Setup price

+ You likely need an accountant to keep track of stuff, like VAT reports, PAYE stuff etc

+ You need extra insurance

I was freelance for a long while, and some years I had to literally stop working not to fall into the VAT slice which would have made my life very complicated.. I think at the time it was 80k; some years I worked just 9 months. After a while I decided to just go LTD, pay the VAT, the taxes and not have to worry.

If your income is less than the VAT threshold, it still migth be worth it to stay freelance if you want simplicity...

I still recommend an accountant you can count on, year in/out -- I'd stay away from big accounting firms as they don't 'know' you -- I've been with my accountant for 18 years now, he even was one of my reference for my SGC -- a good relationship with a serious chartered accountant will save you peace of mind AND money in the long run...

 

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Ltd here. I wouldn't attempt it without an accountant, as already mentioned.

Insurance I guess would depend on your trade. In fact, many of the answers to pros and cons could be trade specific. The finance stuff buze already pretty much covered.

One example of a trade-specific thing that might sway it is, for example, in software development (what I do), a lot of agencies won't deal with sole traders. Could've been a big deal for me, although I'd expect I was going direct sooner rather than later to clients - I didn't want to rule out the use of an agency.

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Forget  worrying about the VAT it matters not you're only a collector for the government, gone are the days of making a bit for collecting it, you add it to your bill invoice put it to one side and then pay it to the vat man quarterly.  I have both ways over the years but with the recent changes asked around more knowledgeable folk and LTD company is still the way to go. Even with the recent CIS4 20% deductions for your personal paye part of your income, if this is not all used to pay your personal tax it can be offset and used to pay all or towards corporation tax bill depending how much is left.

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The only real difference is the protection of your personal assets being a Limited Company. If someone sues you as a sole trader, for whatever reason, then they can quite literally have the shirt off your back. If they sue the limited company then liability is limited to the company's assets and not yours. Ither than that I think you can pay yourself and any other director up to £5k tax free every year so long as the company's profits allow it, obviously. A bit more paperwork on the Ltd side but a good accountant would be on top of that. But that is it, in a nutshell.  

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As above, go limited for personal asset protection - especially if you do anything with risk of a claim against you or there's the risk of non payment e.g. anything in the construction industry.

However, if you have no assets or they are all in the wife's name then you can go sole trader because administratively it's easier.

 

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I've been LTD for years. I have a garage with ,2 of my son's. Ltd was recommended by a previous accountant (sadly moved abroad) and to date it has always been beneficial and financially better. I have a great accountant, not expensive, always there with advice. I consider him key to a good business and yes if you were to be sued, as sole trader they can take everything, not so as Ltd.

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I used to be ltd and went back to sole trader and do find it a lot easier on the paper work 

you can still  be sued as a Ltd director  just like a sole trader as my mate found out with the Environment agency.

  if your worried about being sued take out legal insurance

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1 hour ago, mowdy said:

I used to be ltd and went back to sole trader and do find it a lot easier on the paper work 

you can still  be sued as a Ltd director  just like a sole trader as my mate found out with the Environment agency.

  if your worried about being sued take out legal insurance

I think you will find people are referring to being sued for debt, which obviously is not covered by legal insurance.

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17 hours ago, mowdy said:

I used to be ltd and went back to sole trader and do find it a lot easier on the paper work 

you can still  be sued as a Ltd director  just like a sole trader as my mate found out with the Environment agency.

  if your worried about being sued take out legal insurance

I never understand this reasoning (no offence). If you choose to run a business, accept there'll be some paperwork. Making what's arguably the wrong choice in business to save on paperwork baffles me.

I hear this a lot, contractors like me choosing to operate under umbrella/sole trader for the sake of filling out some paperwork. Madness.

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2 hours ago, DanBettin said:

I never understand this reasoning (no offence). If you choose to run a business, accept there'll be some paperwork. Making what's arguably the wrong choice in business to save on paperwork baffles me.

I hear this a lot, contractors like me choosing to operate under umbrella/sole trader for the sake of filling out some paperwork. Madness.

I employed 10 men when I was limited and dropped back down to a sole trader

and came out of the vat as well I saved upwards of 10k a year in acountants fees and extra insurance and tax 

There are quite a few other company’s I know who have also deregistered since the tax breaks have changed.  

The tax man is also looking at closing umbrella  company’s as they look at them as 

tax evasion schemes.

going back to sole trader worked very well for me each to there own 

 

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6 hours ago, mowdy said:

I employed 10 men when I was limited and dropped back down to a sole trader

and came out of the vat as well I saved upwards of 10k a year in acountants fees and extra insurance and tax 

There are quite a few other company’s I know who have also deregistered since the tax breaks have changed.  

The tax man is also looking at closing umbrella  company’s as they look at them as 

tax evasion schemes.

going back to sole trader worked very well for me each to there own 

 

Same here,most domestic customers hated that i had to charge vat,now i am sole trader again but have insurance,liability etc and only work for domestic customers and a long waiting list.

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20 hours ago, Remimax said:

  when you look at ltd company's on company house how can you be shown as" actve" but have no declared accounts and minimal assests like £150 logged.

i thought you had to file  full accounts every year.

By not trading. 

As an example, I have a company registered but don't submit accounts because it's not trading as in it has no income, expenditure or assets other than the share capital.

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