Should you run your business as a company or as a sole trader?

incorporation

The issue of whether to run your business as a company or a sole trader or partnership is an important one. In this factsheet on incorporation, we summarise the pros and cons of operating as a company including outlining the potential tax savings available from operating as a company.

Should you Incorporate your business?

There may be a number of good reasons for considering the use of a company as part of an effective tax planning strategy. However, there are many factors to consider, so we would strongly advise that you seek professional advice before taking any steps – the DRG Chartered Accountants team would be delighted to discuss your personal circumstances and the advantages and disadvantages of incorporation for you and your business.

In this fact sheet on "Incorporation", we will consider:-

  • Is trading as a limited company the best option?
  • Is it better to take a dividend rather than an increase in salary?

Incorporation and tax issues

  • Summary of relevant tax and national insurance (NI) rates 2020/21
  • Pension provision

Incorporation and other tax issues

  • Capital gains
  • Relief for goodwill
  • Property taxes
  • Income tax
  • Capital allowances

Non-tax advantages of incorporation

  • Limited liability
  • Legal continuity
  • Transfer of ownership  
  • Borrowing
  • Credibility
  • Pension schemes
  • Staff incentives

Disadvantages of incorporation

  • Administrative burden
  • Privacy
  • PAYE/benefits
  • Dividends
  • Transactions with the business owner
  • Director's responsibilities

 incorporation cover

Pros and cons of incorporation. Read our fact sheet to find out more. Get in touch with DRG to discuss whether you run your business as a sole trader or limited company


The decision whether to incorporate or not is a complex decision. If you would like to discuss your personal circumstances further, please do not hesitate to get in touch with the team at DRG Chartered Accountants.


DISCLAIMER: This information is for guidance only, and professional advice should be obtained before acting on any information contained herein. We will not accept any responsibility for loss to any person as a result of action taken or refrained from in consequence of the contents of this publication.

 
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Donald Reid Group
18a King Street, Maidenhead, Berkshire SL6 1EF | T: 01628 760 000 | E: info@donaldreid.co.uk
Francis House, 11 Francis Street, London SW1P 1DE | T: 020 7108 6322 | E: info@donaldreid.co.uk

"My company has used DRG for a number of years. They are proactive and efficient with all aspects of their work. They keep on top of our tax and accounting requirements, and help with the development of our business strategy.

We view DRG as a key supplier and crucially a partner and would highly recommend the firm – in particular to other fast growing businesses."

David Folkman, Director

"I’ve worked with a number of accountants over the years and have never found another company who offers the same level of care, support and professionalism. They’re always on hand to offer advice and guidance, above and beyond the service that I pay for. I would recommend them wholeheartedly."

Joe Hill, Director

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Outdoor Academy

"I have always worked as an employee so when I decided to set up my own business, I did not know where to start. DRG took the time to explain how working as a sole trader would be more beneficial to me setting up a limited company (which I had always thought was a requirement for running a business). They gave me practical advice on the records I need to keep as well as general guidance on setting up my business and helped me claim a large tax refund after my first year of trading."

Sole Trader

"I have been a client through a number of different ventures with DRG since 2007. They have proved the benefits of a local firm with Big 4 experience in providing sound business and tax advice by being accessible, having in-depth knowledge of my business and able to form good working relationships at different levels with me and my staff. We also enjoy the benefit of their excellent accountancy and payroll services. I couldn’t recommend them more highly."

Paul Dunn-Sims, Halcyon Home Care

"I have been extremely impressed with the service level and attention to my business."

Sherwood Event Services

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Extrinsica Global

"A professional service at a competitive rate. Perfect for small businesses."

Design & Technical Management

"We have used DRG since our incorporation. They have supported our development providing sound business advice on top of our accounting requirements.

They are proactive and helpful in responding to queries and I would recommend them to any prospective client."

Rob Farrow, Alchemy Fireworks Ltd

"Daniel and his team at DRG provide a friendly service and are always able to explain issues in clear terms."

Kensington Communication Consultants

"An excellent service, good advice – we would recommend."

Burnham Garage