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When should I change from sole trader to limited company?

Many businesses begin life as a sole trader by default: it’s just how many people start out. But when is it time to make the change from sole trader to a limited company? With more personal responsibility on you when it comes to factors such as losses and tax, changing to a limited company structure might be the best option for you and your business.

Limited company formation is a good route for most new businesses. This is because it’s a structure that provides some protection for you as an individual. According to, the definition of a private limited company can be understood as something which is a legal entity in its own right and is separate from the people who own it. A limited company is also considered separate from your own personal finances. Owners are given limited liability and are only liable to for debts up to the value of what they have invested.

There are certainly some considerable advantages in changing from sole trader to limited company, and a change of structure could definitely pay off in the long-run. Let’s take a look at why you might want to make the change to sole trader sooner rather than later.


Protect your business name

One excellent advantage of forming a limited company is that you can secure the name you’d like for your company. This is particularly handy if you want to create a website, produce business cards or get a logo designed. Protecting that name puts you safely in the knowledge that no one else is going to take it and form a company using a name which is similar – which is really useful if you’d like to grow and become recognised as a brand.


Become more tax efficient

The difficult thing about being a sole trader is that you face being taxed on your profits. However, this is only once you earn more than £11,000 a year. After you reach this point you might find yourself paying up to 45% of your overall income if you earn over £150,000. If you change to a limited company setup, however, there are a lot more benefits to be had in terms of paying less in personal taxation. As a limited company, you will be liable to pay corporation tax for any profits that you make. This is currently set at 19% and will decrease to 18% by 2020. Additionally, you can pay yourself separately in dividends, an option you cannot take as a sole trader, allowing you to keep more of your earnings. Learn more about limited company tax in this simple guide.


Limit your liability  

Another very important benefit to note is that you will no longer be personally liable for debts that your company might incur. This means you won’t find yourself out of pocket if things go wrong, giving you that extra layer of protection. Remember, the success of your business is not always totally dependant on your efforts. This kind of insulation is not something a sole trader gets to benefit from. This means it is worth bearing in mind when deciding how you want to structure your business operations.


Boost your professional status and attract new clients

Generally speaking, having “Ltd” on the end of your company name looks a lot more professional to customers. It shows potential clients that you take yourself and what you do seriously. Being able to call yourself a private limited company gives off a sense of prestige. In every part of your business, it’s important to convey a sense of a sense of confidence in yourself. That, in turn, will make customers confident in you.


Take your business to the next level

When you change from sole trader to limited company, the opportunities for growth start to truly emerge. You’ll have a protected business name, added professionalism and more cash for you to keep. This means a limited company structure is undoubtedly going to give you and your business the necessary tools to thrive.

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Who are we?

Real People

Our fantastic customer support team have lots of experience forming companies. They're happy to help whether you need advice before, during or after the process.

Competitive Prices

Our prices are lower than most because unlike some agents, we’re able to cut out the middle-men and do most of the work ourselves from our office in Old Street.

Options To Suit You

Every business is different, and we want to make sure you get exactly what you need. Choose the package you want and select any helpful products and services you'll need along the way.

Our formation packages

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  • £9.99
  • Our E-Formation package is perfect if you want to secure a company name or establish a dormant company and require no official printed documents.

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  • £19.99
  • Essential Formation offers you complete confidence that you’re starting a company with the rules and regulations covered.

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  • £59.99
  • Our Entrepreneur package offers you all the advantages of quick and easy formation, with all the paperwork you need to set up as a limited company.

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  • £89.99
  • Our Super Formation Package has everything and is the perfect way to set up your company with speed, ease and confidence.

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No hidden extras, just simple online process.

Register your own company from £9.99

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