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Advantages of a Limited Company versus Sole Trader

September 23, 2014

If a limited company should fail, there is less risk to personal and family assets than there is with sole traders or partnerships.

 

Companies with a turnover below £6.5 Million do not need an audit resulting in the cost of year end accounts much closer to those of a sole trader.

 

Shareholder Directors can select a package of low salary and higher dividends aimed at reducing tax and national insurance both for the individual and the company. Directors that take a low salary and dividends do not pay the 9% NI that sole traders pay above the national insurance threshold.

 

Shareholdings can be split between family members to spread the dividends and reduce higher rate tax liability (or eliminate it all together). 

 

Limited Companies often have a higher marketing profile than other businesses.

 

Limited Companies can be easier to sell than sole traders or partnerships.

 

There are a few disadvantages, but as long as the company does not trade whilst insolvent and there is no fraud there is very little risk to the directors.

 

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