Sole trader vs LTD

[NorfolkAYA]

Hi all,

For a one man band, offering services like (groundworks) as opposed to a product with no chance of charging VAT etc as below threshold. 

 

Is sole trader better than a LTD company? 

I'm after some advice from people that have been there and done it.

 

Cheers pete 

[welsh1]

Simply put sole trader you can lose your home if it all goes horribly wrong, Ltd company you have limited liability and keep your home

Have a read of this
https://www.simplybusiness.co.uk/knowledge/articles/2020/06/difference-between-a-sole-trader-and-a-limited-company/

[TIGHTCHOKE]

As above!

[Jaymo]

Seconded as to ‘as above’ 

 

[oldypigeonpopper]

Limited Company 👍

[millrace]

Financially you will be worse off....

Higher accounts fees

More paper work to be in on time

You will be excluded from all covid support......

You may protect your house tho the rules on this are not what they used to be

Ltd companys are first on the list for tax rises to pay the debts we were excluded from receiving any help 

Loans are harder to get.....banks want more guaranteed....

Hope this helps....

[udderlyoffroad]

48 minutes ago, NorfolkAYA said:

I'm after some advice from people that have been there and done it.

Ltd company, but talk to your accountant.

What's that, you haven't got one?

Get one.

A good one will easily earn his fee several times over in what he saves you.

Remember, advice on here can be worth exactly what you paid for it.

[Vince Green]

1 hour ago, welsh1 said:

Simply put sole trader you can lose your home if it all goes horribly wrong, Ltd company you have limited liability and keep your home

Have a read of this
https://www.simplybusiness.co.uk/knowledge/articles/2020/06/difference-between-a-sole-trader-and-a-limited-company/

Thats true in principle but in reality it doesn't happen that way. No financial institution will lend money to a limited company without a personal guarantee being signed by the principal.

Same when you come to sign a lease or take out a line of credit. So for the little man the benefits are only theoretical .

Ltd company means much higher accountancy costs, sole trader you can buy a software package and do a lot of it yourself

Edited March 5, 2021 by Vince Green

[udderlyoffroad]

32 minutes ago, Vince Green said:

Ltd company means much higher accountancy costs, sole trader you can buy a software package and do a lot of it yourself

How much do you value your time at?

Often you're better off doing paid work and letting someone else do your books.

Other opinions are available of course

[Vince Green]

47 minutes ago, udderlyoffroad said:

 

 

47 minutes ago, udderlyoffroad said:

How much do you value your time at?

Often you're better off doing paid work and letting someone else do your books.

Other opinions are available of course

My time would be costed at £150 per hour but have always done my own books, only way to get them done properly IMHO. Then give it all to the accountant at the end of the year to sign off.

Doing books is largely a thing of the past these days for a one man band sole trader. They can just snap the invoices on their phone and its all done by the package.

The real bugbear for the OP  will be costing jobs and preparing tenders if he is going to be doing groundwork. That is actually very difficult to get right.

Edited March 5, 2021 by Vince Green

[Westward]

Your home is only at risk if it's used to guarantee a loan. A Ltd company only limits liability to commercial creditors but banks are preferential creditors and you can still lose your home. Remember that banks will happily lend you an umbrella when the sun's shining but they usually want it back when it rains.

If your business is primarily trading your time and knowhow rather than trading in goods then sole trader makes sense until you get into higher rate tax. At that point talk to a tax accountant about the pros and cons of going Ltd.

[team tractor]

6 minutes ago, Westward said:

Your home is only at risk if it's used to guarantee a loan. A Ltd company only limits liability to commercial creditors but banks are preferential creditors and you can still lose your home. Remember that banks will happily lend you an umbrella when the sun's shining but they usually want it back when it rains.

If your business is primarily trading your time and knowhow rather than trading in goods then sole trader makes sense until you get into higher rate tax. At that point talk to a tax accountant about the pros and cons of going Ltd.

This ^^^^^
 

 

you can still loose your home and go to prison if found guilty of any wrong doing . 

[grrclark]

There are loads of considerations in respect to which is the best route to go down.

Will you want to own or buy equipment to support the business, i.e. mechanical plant or vans, etc.  Are you buying material up front and then charging it back to the end user customer?  What is your own level of financial knowledge and ability to do rudimentary book keeping?  Would your customers primarily be end user punters or would you be dealing with other businesses?

For a genuine one man band operation if all you are doing is selling your own time by and large, maybe using your own tools and running back and forward in your own car, then the sole trader route can be much less burdensome in respect to the level of reporting and form filling that you have to do.

If you are doing anything beyond that then a Ltd company is probably the more beneficial way to go as there are greater opportunities to manage more complex requirments, but that also means more complexity on your side.

As has been said above, get a good small business accountant to give you guidance on this that is specific to your own needs.

[welsh1]

4 hours ago, Vince Green said:

Thats true in principle but in reality it doesn't happen that way. No financial institution will lend money to a limited company without a personal guarantee being signed by the principal.

Same when you come to sign a lease or take out a line of credit. So for the little man the benefits are only theoretical .

Ltd company means much higher accountancy costs, sole trader you can buy a software package and do a lot of it yourself

He is talking about a groundworks business, if something went wrong and he dug up an oil pipe and caused hundreds of thousands of pounds of damage, and he was then sued by the utility company, he would need very good insurance or he might find his house being sold.
If he was a limited company there will be limited liability, it is seperate from the individual and as such only the company assets may be seized.

Belive me, and i speak as a retired High Court Enforcement Officer, there are many that have had their cars, vans trucks, caravans and houses seized when they were sued as sole traders.
And there are many who when approched have shown the assets of their ltd company, which usually turn out to be a computer , printer and a few other low cost items, all in all not worth seizing.

[Westward]

2 hours ago, welsh1 said:

He is talking about a groundworks business, if something went wrong and he dug up an oil pipe and caused hundreds of thousands of pounds of damage, and he was then sued by the utility company, he would need very good insurance or he might find his house being sold.
If he was a limited company there will be limited liability, it is seperate from the individual and as such only the company assets may be seized.

Belive me, and i speak as a retired High Court Enforcement Officer, there are many that have had their cars, vans trucks, caravans and houses seized when they were sued as sole traders.
And there are many who when approched have shown the assets of their ltd company, which usually turn out to be a computer , printer and a few other low cost items, all in all not worth seizing.

As I said above, more often than not it's the secured preferential creditors such as banks who will only accept your house as full security that can shut you down and make you homeless. Failing to have adequate liability insurance is a different subject and the directors can be and often are, sued personally even if it's Ltd company.

[WalkedUp]

10 hours ago, NorfolkAYA said:

Hi all,

For a one man band, offering services like (groundworks) as opposed to a product with no chance of charging VAT etc as below threshold. 

 

Is sole trader better than a LTD company? 

I'm after some advice from people that have been there and done it.

 

Cheers pete 

Pete,

You do not want to be a sole trader signing contracts. We administer construction contracts and sole traders are like lambs to us. 

If you are leaving most profit in tbf business then a limited liability company (Ltd) would be the way to go. However as you are most likely taking out all profit as salary then you want to be a Limited Liability Partnership (LLP). If you are up north I’ll give you the contact of a great accountant to speak to. He’s a shooting man and has successfully run many businesses as well as his accountancy firm. 

[Mikeyalbie]

I have been thinking the same for a long time. I'm a bit thick with things like this. I run a driveway company got 2 men working with me I'm not sure if I should be limited or not most of my mates are and they do the same as me. Any help would be appreciated.

[WalkedUp]

Where are you based? 

11 minutes ago, Mikeyalbie said:

I have been thinking the same for a long time. I'm a bit thick with things like this. I run a driveway company got 2 men working with me I'm not sure if I should be limited or not most of my mates are and they do the same as me. Any help would be appreciated.

 

[Mikeyalbie]

Southampton. Yout self ?

[welsh1]

2 hours ago, Westward said:

As I said above, more often than not it's the secured preferential creditors such as banks who will only accept your house as full security that can shut you down and make you homeless. Failing to have adequate liability insurance is a different subject and the directors can be and often are, sued personally even if it's Ltd company.

When someone obtains a high court writ against you belive me everything you own of value including your house is on the table.

[WalkedUp]

1 hour ago, Mikeyalbie said:

Southampton. Yout self ?

My accountant is based in the high peak. Too far for meetings from Southampton but you should look for a proper financial advisor. The money is peanuts and once set up you can run it yourself. You can set it up yourself if you really want but that’s above my knowledge. 

[Westward]

21 hours ago, welsh1 said:

When someone obtains a high court writ against you belive me everything you own of value including your house is on the table.

I know how it works, but there are ways to avoid losing your house in such a situation. Everyone setting up in business needs to consider carefully whether they need liability and/or  consequential loss insurance.

[mowdy]

I run a construction company 2-3 men on books .I used to be a ltd company but 12 years ago i went back to sole trader. it just works better for me.

You should always have good insurance and not just Public liability at work .My Contractors all risk cost me about £1000 a yr up to £2,000.000 + of cover 

[WalkedUp]

CAR doesn’t cover agreeing contracts that would bankrupt you etc. You can have the protection of limited liability and the freedom of a sole trader. Please just read the below or speak to an accountant: 

https://www.coddan.co.uk/same-day-llp-formation-in-united-kingdom/uses-of-an-llp-in-business-by-uk-entrepreneurs/llp-registration-for-sole-trading-business/

[Mikeyalbie]

On 05/03/2021 at 21:55, WalkedUp said:

My accountant is based in the high peak. Too far for meetings from Southampton but you should look for a proper financial advisor. The money is peanuts and once set up you can run it yourself. You can set it up yourself if you really want but that’s above my knowledge. 

Thanks for the advice I have got an accountant hes really good but I'm sure he doesn't deal with ltd. Hes a bit basic aswell he does all my paper work for the gov and tells me what I owe or what ever but hes not much of help if I'm honest. I definatly wouldn't no where to start I'm only 27 but didnt to much schooling atall.