Frequently Asked Questions

What’s the difference between setting up as a sole trader, a partnership or a limited company?

A sole trader is just that – it’s you! This is the type of business that is started by someone who has a skill or service that people buy. You could be a self employed plumber, designer, accountant, or run a small shop. This is probably the most common way that businesses start up.

• Advantages – you only need to register with the Inland Revenue as self employed, and you start to pay a class 2 National Insurance stamp (currently £2.20 per week) You make all the decisions. Whilst you should obviously keep accounts, you are not legally obliged to file formal accounts.

• Disadvantages – you are solely responsible for any business debts – personal assets can be seized.

A partnership is set up to enable a small number of people (can be just two) working together to share responsibilities and the rewards of the business. It is sensible to draw up a partnership agreement outlining the financial responsibilities of the partners. This can be used for settling individuals’ tax liabilities, or if the business fails or is wound up.

• Advantages – More people to spread the workload (& share the profits) No legal requirement to file formal accounts.

• Disadvantages- All partners are responsible for business debts. In the event of bankruptcy, personal assets can be seized.

A limited liability company offers your business protection and rights – like your company name. However duties are imposed e.g. filing formal accounts for public inspection. There is a cost involved in registering a company. You, and other shareholders are limited in any liability for debt. There may be some tax benefit in setting up as a limited company.

• Advantages – Limits your liability if anything goes wrong. Can raise money through selling shares. May be more likely to project a more professional image to suppliers & customers. May be easier to borrow money.

• Disadvantages – you must comply with a wide range of legislation which can add to the administrative and financial cost of running the business.

If you need a more detailed response or would like to know more about how we can support your business, please contact us by using our Contact Us form, or alternatively you can email us at or call us on 0844 264390