Own Business V Sole Trader

Thanx 4 The Fish · 11-02-2004 3:02pm #1

Does anybody know anything about the differences in this or of a good source of info which compares and contrasts the differences or anything along those lines.

Thanks,

M

yop · 11-02-2004 3:22pm

Sole trader

The advantage of being a sole trader is that it is simple and inexpensive to create and operate. The legal and taxation formalities are straightforward and there is no little or no delay in setting up such a business structure.

The only legal formality is the registration of your business name with the Companies Registration Office.

Disadvantage of being a sole trader is that you are personally liable for your business debts. In the event of your business failing your own personal assets will be available to creditors of the business.

You can use your own name, not as much hassle as you are the only one involved and you do not need to worry what other directors are at.

Probably more satisfaction been the only one involved.

COMPANY
A limited company is in fact a separate legal entity from the shareholders of the company. It is now possible to incorporate a limited company with only one member but there's still a requirement for two directors. The advantage of a limited liability company as the name suggests means that the liability of the shareholders is limited to the amount if any outstanding on their subscribed shareholdings. This usually does not arise in that the shareholdings are nominal shares of a pound each and usually there are no more than 100 shares issued in a private company. In many cases there may only be two shares issued of a pound each. This means that in the event of a company being liquidated the personal assets of the shareholders are not available to creditors.

The disadvantage of a limited liability company is that it is more expensive to create than a partnership or sole trader and there are also many legal requirements for example the holding of company meetings, the appointment of directors and the making of returns to the Companies Registration Office annually.

I generally advise people to set up the business by way of partnership or sole trader in the early stages and depending on how the business is developing it possible to incorporate a limited company to carry on the business.

It is difficult to convert a limited company back into a partnership or sole trader because this involves the voluntary liquidation of the company and the sharing out of the company assets to the individual shareholders. It is very rare for this to happen. It is also very expensive to convert from a limited company into a sole trader/partnership.

It is more usual for businesses to be converted from sole traders/partnerships to companies and this usually happens when the business begins to grow.

http://www.oriordansolicitors.com/html/limited_comp.html
http://www.efmolloy.com/soletradervcompany.html
http://groups.google.de/groups?q=Own+Business+V+Sole+Trader&hl=de&lr=&ie=UTF-8&selm=H7GyKQAPSVA1Ew%24w%40networkdesigns.demon.co.uk&rnum=5

The Brigadier · 13-02-2004 7:36pm

If you are looking to start contracting, many employers will not work with sole traders.

casper- · 16-02-2004 8:41am

My vote's for forming a limited company, provided you plan on doing whatever it is for more than a year or so, and feel reasonably confident you'll make cash

If you're worried about not having enough money for the first year, then perhaps starting in a sole trader and switching to a limited company later is the way to go.

Victor · 16-02-2004 2:47pm

Originally posted by yop
The only legal formality is the registration of your business name with the Companies Registration Office.

This is only necessary if you are not using you own name, but is helpful if you want to protect that name.

John Murphy can use "John Murphy" and "John Murphy" without registration, but would need registration for "Murphy Builders" or "Wicklow Builders".

Kernel32 · 16-02-2004 7:28pm

Just to reiterate James Melodys point, for contracting most companies will not work with a sole trader. As far as I can tell this is due to liability issues and there being an implied employer employee relationship when you're a sole trader.

Victor · 17-02-2004 10:22pm

Originally posted by Kernel32
Just to reiterate James Melodys point, for contracting most companies will not work with a sole trader. As far as I can tell this is due to liability issues and there being an implied employer employee relationship when you're a sole trader.

Being a company also indicates a certain level of sophistication.

Own Business V Sole Trader

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