Are you unsure whether to set up your business as a limited company or become a sole trader? In this article, we discuss the main advantages of a limited company to help you determine whether it is the right choice for you and your business.

What is a limited company?

A limited company is simply a private company which is a separate legal entity to the owner of the business.

The limited aspect of the company is the key thing to think about. Limited companies offer limited liability for owners meaning they will not be personally liable for all financial losses made by the business. The owners are legally responsible for the debts, but only to the value of what they have invested in the company. By setting up a limited company, you and your personal assets will have added protection if anything goes wrong for the business.

Tax and national insurance benefits

business bounce back scheme

Limited companies can save a great deal more on their tax bills than sole traders. However, this will depend on personal circumstances. To become more tax-efficient, you can give yourself a small salary and take the rest of your income as small dividends.

If you do this, you will ensure you’re paying lower tax rates on dividends, which is a 7.5% basic rate, rather than income tax, which has a 20% basic tax rate.

Dividends are also not subject to National Insurance, so you can save money while running your business.

A limited company can help with a business reputation

business reputation

Becoming a limited company can help you to establish your reputation and credibility in the business world. Some businesses and clients sometimes refuse to work with sole traders as they prefer to work with other limited companies, believing they have a better reputation.

Protection for your business

Limited companies have to register their name with Companies House, this means that you have more protection when securing your trading name, as there is a record of your business name if anyone ever attempts to use it or anything similar.

If you are a sole trader, you simply do not get the same protection. Without an official record of your trading name, if a business has a similar name to you, there is not much you can do about it.

Easier access to finance

Being a limited company often makes it easier to secure finance because of the fact that you are a separate legal entity. This is because a lot of finance companies do not look as favourably at sole traders as they do at limited companies.

Being a sole trader doesn’t have the same financial benefits, as loan applications rely on your personal finances, which may not be ideal, especially if you have debts yourself. Having a limited company with a shareholder structure is often best if you are looking for investors as it will help them feel a lot more secure when giving you money.

Selling the business is simpler

business for sale sign

If you ever feel the need or reach the point where you want to sell up, it is much easier to part ways with your business if you are a limited company.

Transferring the ownership of a limited company is a lot simpler and more practical when it comes to selling your business because of the fact it is a separate legal entity to yourself. Whereas if you are a sole trader you will be trading in your own name, which is not something you can pass on easily.

How to set up a limited company

It is always best to seek the advice of qualified accountants when trying to set up your limited company, as they can guide you through the process and help you get incorporated. The accountants will ensure that everything is completed correctly and to the highest standard so that you can start your business without any worry.

Maple Accountancy can help you set up your limited company

Are you unsure about making your company limited or how to go about doing so? Maybe you have already started your application, but are seeking further advice on the matter? Whatever your issue, our expert team is always ready to help. Get in touch with us today at or 01332 207336 to find out how we can help you set up your limited company.