Tax & admin · 21 August 2020

What is the difference between a sole trader and a limited company?

What's the difference between a sole trader and a limited company?

For the founders of new companies, it can be difficult to know how best to structure a business. To help you choose the right option, here’s a simple guide to the differences between a sole trader and a limited company.

What is a sole trader?

A sole trader is someone who is self-employed and the sole owner of a business. It’s the simplest business structure to set up, and the most popular choice for the self-employed. 60% of small businesses operate as sole traders. According to government figures, at the beginning of 2019 around 3.5 million businesses were operating as sole traders.

You can set up as a sole trader through the government website, which is necessary for tax purposes.

What is a limited company?

A limited company is a legal entity in its own right. Unlike a sole trader, a limited company has its own legal identity which is separate from its shareholders or directors. This is true whether the limited company is run and operated by one person or many.


 
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