Easiest and Quickest to Set Up
Setting up as a sole trader is quick and easy to do, particularly when you compare the process with setting up as a limited company. As becoming a sole trader is quick and easy, it is also less costly to do. It simply involves registering with the Revenue as a sole trader.
Easier to Run and Administer
Administering a sole trader business from a tax and regulatory perspective simply involves submitting one personal tax return a year.
Limited companies, on the other hand, must submit an annual return and accounts to the Companies Registration Office once a year, plus they are subject to audit.
Lower Accountancy Fees
As setting up and then administering a sole trader business is straightforward, accountancy fees are typically lower than for limited companies. In addition, sole trader business accounts are typically less complicated than accounts in limited companies or other types of company. This also helps keeps accountancy costs low.
Closing the Business is Easy
Just like setting up a business as a sole trader, closing one is an easy process too.
Control of the Business
In other types of company, additional people must be involved in the running of the business. In a partnership, for example, this is your partner, while in a limited company it is the shareholders and directors. In other words, you may need to relinquish some control over the running of your business if you choose these company structures.
As a sole trader, however, you retain complete control. This means you can move the business in the direction you want it to go, as well as speeding up decision making. Sole trader businesses are often more agile too.
Keep the Profit
If there are other people involved in your business, they may be entitled to a percentage of the profits.
As a sole trader, however, you own the business in full. In other words, all profits made by the business are yours.
Keep Your Information private
Part of the process of running a limited company is making an annual return. These returns and accounts are public which means anyone can access personal information about you. This includes your address and date of birth. It also includes information about your business.
As a sole trader, you don’t need to disclose any of this information unless you choose to.
What About Disadvantages?
Of course, there are disadvantages to running your business as a sole trader too. As a result, the sole trader option is not always the best, even if you run a small or micro business.
The main disadvantages concern liability and tax. With the latter, running a limited company may make it possible for you to reduce your tax bill. On liability, you as an individual are legally separate from your business when you are a limited company. As a sole trader, however, you are personally liable for the business, including any debts the business has.
To more information on company structures, or help with setting up your business, please contact a member of the Gilroy Gannon team.