Sole trader or ltd company

[autumnglow]

Ive just secured a contract but am unsure whether I should register as a sole trader or as a limited company.can you help?

[Tatey25]

Hi, you don't need to register as wa sole trader. You simply declare your earnings on your annual tax return. There are downsides, and for the sake of £20 you can incorporate a company to become limited. The benefits of a limited company is that the company is a separate legal personality, which separates any company liabilities from you personally. The company would be liable under the corporate vail. With an unincorporated business (sole trader) you don't have this protection. Any legal claims or liabilities would become your personal liability, and could give anyone suing you access to your personal assets in a claim to you.

[autumnglow]

Thank you I have set up a ltd company

[Tatey25]

That sounds a sensible approach. Good luck!

[Laquila]

So if it says not a daft question, why wouldn't a tradesman/contractor/freelancer set up as a Ltd company, rather than a sole trader? What's the downside?

[Secretspillernamechange]

Setting up a company comes with a lot of extra responsibilities. The company needs to file annual accounts and an annual confirmation statement. It will need a corporation tax return filing in addition to your self-assessment return and if you want to extract cash regularly as salary you will need to register it as an employer and operate payroll including RTI reporting.

If you just take cash out of the business and don't repay it within a certain timeframe or put it through payroll then it will incur a penalty tax. And then there is the intermediaries (IR35) legislation to make sure you don't fall foul of if it's your personal service company. Please make sure you keep on top of this since there are frequently automatic penalties for missing deadlines etc.