Have you ever wondered what exactly is a ‘Limited Company’ and how is it different to just being a Sole Trader running your own business?
Well for this blog I’ll explain it from the ground up as if you are a self-employed Sole Trader looking to register a Limited Company.
In this case, as a Sole Trader you need to think of yourself as a single ‘entity’ (not the ghoulish type!) so you personally ‘trade-as’ a business and you personally have to do your own accounts etc for you and your business.
This works fine for many people since they work mostly by themselves and if they need to occasionally bring in teams of people for certain jobs, they simply pay them as outsourced workers and can claim that from their tax return at the end of the year.
However, if your business looks like it is going to start needing people on a full-time basis and is growing into a much larger operation then you’ll need to look at registering your ‘trading-as’ business into a Limited Company.
This then means that you will no longer be self-employed and ‘trading-as’ your business, all under one entity. Instead you will register your business as an official Company which means you no longer are personally responsible for the debts and liabilities that come with that company. It becomes its own entity, separate to you as an individual. You will either become a shareholder of the company (and take dividends etc) or simply get that company to hire you as the Managing Director etc. So your self-employed days are gone and you’re now hired by your Company as an emploee – totally separate entities.
That’s pretty much it in a nutshell really when describing what a Limited Company means ‘on paper’. It is its own entity, completely separate from you personally and runs as its own company. You simply help it along by either being a shareholder or employee for that company.
I hope that helps and if you want anymore information just contact me at firstname.lastname@example.org
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