Many people start their business as a sole trader. It is easy to get moving with a business idea, with a limited number of registration requirements. In addition, there is no input from others to hinder a person’s ability to make important decisions quickly. However, changing from a sole trader to a limited company is either necessary or beneficial for a number of reasons.
You may find, for example, that some businesses are more confident in doing business with limited companies, as opposed to ‘one man bands’. Having the words ‘limited’ or ‘ltd’ after a business name breeds confidence in customers, clients and suppliers. It suggests a more permanent arrangement as it comes with certain formalities and transparency as it is registered at Companies House, which makes certain information about a company publicly available.
In addition, there is the protection shareholders have from limited liability. A limited company is a separate legal entity from its shareholders, meaning that the company can contract and incur liabilities in its own right. Also, if the worst were to happen and legal action was taken against the company, the shareholders own personal assets are protected (except in limited circumstances, including if they have given a personal guarantee). Operating through a company may also provide certain tax advantages.
Contact Tim Field
At Birkett Long, our Commercial and Corporate Finance Team has considerable experience in assisting clients change their business structure from a sole trader to a limited company. Contact us to guide you through the steps.
