Limited Company Information
Choosing to set up and operate your business as a private limited company is a popular way of trading. There are many benefits, such as reducing your financial risk and a perception of
greater credibility and status for the business and its owners.
However, you need to be aware that the formation and operation of a company is highly regulated and you will have to commit time and money to ensure compliance.
The main legislation covering the regulation of companies is the Companies Act 2006 (the Act), which has largely replaced the previous Companies Act 1985 and the Companies Act 1989.
A company has a separate legal identity to that of the owners, unlike a sole trader or a partnership where there is no distinction. This means that a company can own property and other assets, as well as sue and be sued.
Sole Trader Information
There’s not really a difference between being a sole trader and being self-employed.
‘Sole trader’ describes your business structure, while ‘self-employed’ is a way of saying that you don’t work for an employer or pay tax through PAYE.
As a sole trader, you are the legal entity in your own right, employing people and entering into contracts.
You have no limited liability; your own assets are at risk should the business fail.
The first step to becoming a sole trader is to choose a name. Make sure you have chosen a name that’s not being used by any other business.
If you do then they could stop you using it. With this in mind, it is worth considering registering your name as a trademark to prevent other people from using it.
You can trade under your own name, or come up with a suitable business name.
Bear in mind that if you decide to use a business name, you must make sure that your business stationery displays your own name as well as the trading name of the business, and be careful that the name does not contain words that people might find offensive or misleading.
Have a business plan and a cash flow forecast which will allow you to manage your business.
Make sure you are generating enough cash to pay your expenses and tax liabilities.