Making the jump from sole trader to company

Life as a sole trader or freelancer is good, but what happens when you start to outgrow yourself? Expansion and growth are great, but taking that next step can be daunting. If you find that you’ve been umming and ahhing over whether the change is right for you, have no fear. We read your diary, took note of your worries, and wrote a little something to help you make the decision, and if necessary, take that next step.

Is it right for you?

Although becoming a limited company seems like the next, natural step in business, it may not necessarily be best for you. It’s not worth the time and money to expand if the business model doesn’t suit you or the kind of work you do. Aside from more efficient taxing and much more weight behind your company name, you’ll also benefit from:

More security. As a sole trader, any debts you acquire are your own, and if the worst should happen, you will have to provide the assets to pay back anything you owe. If you have a limited company, you’ll only ever have to pay what you’ve put into the company and nothing more. The debits belong to the company, so your personal assets and finances are more protected.

Better employability. As a limited company, you may find that getting work from larger companies is far easier. There are certain corporations which will not deal with sole traders or freelancers due to the intricacies involved in paying them. As a limited company, payment becomes much simpler and you open yourself up to a lot more business. Wahoo!

Better borrowing prospects. As a sole trader, you’ll only be able to borrow according to your own credit rating. Limited companies are able to borrow on their own merit, so chances are you’ll have access to a lot more funds.

Don’t make the change if you want all your company information to stay off Companies House and remain private— as a sole trader you are not obligated to share any details at all. If you enjoy straightforward, simple accounting and paperwork, limited companies aren’t for you either. Your workload will go up significantly if you choose to become the managing director of your own company. If you enjoy the freedom of being solo and playing by your own rules, perhaps you should think twice before making the change.

Still want to expand? Here’s what you do next…

If you want to start the process of becoming a limited company, there are two routes you can take: you can do it yourself with some professional assistance, or you can choose to use a formations agency.

Some of the more popular formations agents are Go Limited who will help you with your paperwork for a meagre £13, or EAC Business Services who will help you get it done in conjunction with Companies House. These guys have ample accounting and paperwork experience and can even help you get a new website set up. The price you pay for the work will depend on who you use and whether you’d like to include extras in your package or whether you want to stick to the paperwork with none of the frills.

If you’re more of a lone wolf type, you can do it yourself via Companies House who charges £13 to file the paperwork for you. If you do decide to tackle the paperwork on your own, it is still a good idea to consult a professional accountant or solicitor to make sure you’re doing it right and to get the support and advice necessary. Unfortunately this is where the additional costs come in, but you’ll also have the support and peace of mind that comes with professional assistance.
Now we’ve given you the knowledge, the choice is yours! If you’ve got any questions, your accountant or solicitor should be able to help you out, failing that, you can drop Companies House an email for some more advice.

Have you gone from sole trader or freelancer to a limited company and have advice for others? Leave a comment below and pass your wisdom on!


23 Aug 2013 09:29
Good post! I am very shortly going to be making the leap in to self employment so I am deciding on which route to take. Thanks for the info!
Ross Llewelyn
03 Oct 2013 23:02
Very interesting and bookmarked for future reference.
22 Dec 2015 11:31
big step to make, very helpful advice

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