Pros and Cons of a Limited Company and Sole Trader
Sole Trader
Fundamentally, a sole trader is a sole owner of the business and is a self-employed person. Operating as a sole trader is the most convenient way to start business and because of its simplicity, sole trader is the most popular business structure.
Limited Company
A type of business structure that has a separate legal identity from its shareholders and its directors is known as a Limited company structure. The guidelines remain the same for a limited company even if it is run by an individual.

Sole Trader or Limited Company Difference:
Sole Trader or Partnership | Limited Company (shareholder / director) |
An individual is the sole owner of the business |
The business is a separate legal entity from the owner / shareholder of the business |
In case of a legal dispute the owner of the business will be sued |
In case of a legal dispute the company will be sued. In the United Kingdom, it is very rare that somebody can sue a director for the firm’s default. Exceptional scenarios when a director may be held accountable are:
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Employment status:
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Employment status:
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Tax on profits:
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Tax on profits:
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Losses:
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Losses:
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Extracting profits
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Extracting profits
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Borrowing
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Borrowing A director can borrow money from the company, under certain limits laid down under Companies Act 2006:
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Pension
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Pension
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Insolvency
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Insolvency
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Selling the business Under the Capital Gains Tax (CGT) rules, if the business or any assets used in the business are sold sole traders are personally taxed for any gain |
Selling the business There is a double tax charge on shareholders, when the business or assets are sold. The company pays corporation tax |
General expenses:
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General expenses:
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Cars and fuel
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Cars and fuel
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Mobile phones
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Mobile phones
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Charging rent for use of home
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Charging rent for use of home
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About DNS ACCOUNTANTS
DNS Accountants is a skillful team of accounting and taxation professionals that helps clients with services ranging from tax planning to self assessment to business set-up. The firm helps owner managed small business and private individuals across the United Kingdom. DNS is an acknowledged firm of ACA’s or Chartered Accountants (CA) and the firm takes pride in saying that we are very helpful to our clients & deliver unmatched customer service and constantly help clients to manage their wealth. The firm’s learned team focuses on helping sole traders with business registration, tax filings and other services such as self-assessment, payroll management and bookkeeping. At DNS, we are constantly in touch with our clients and offer
- FIXED price service
- Consistent and transparent service
- Certainty on tax base and taxation advisory
- Sole Trader or Limited Company Calculator
- Complete guidance onto the difference between sole trader and private limited company
- Step by Step procedure for becoming a limited company from sole trader
Other Services
DNS Accountants offers taxation & accounting services to owner managed businesses and freelancers / contractors. For business owners and freelancers / contractors, it is difficult to keep pace with the ever changing government regulations and rules. Our expert team of chartered accountants and taxation professionals help clients in services ranging from bookkeeping to payroll to tax planning, and filing tax returns. DNS Accountants help clients focus on maximizing their wealth.
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