Are You a Sole Trader?

Are You a Sole Trader? Then You Need To Read This

When you’re running your own business, particularly when you’re a sole trader, deciding what legal structure your enterprise should take is probably way down your list of priorities. In the start-up phase of a new venture, the focus is frequently on getting up and running rather than agonising over whether to remain a sole trader or become an incorporated company.

It’s worth remembering that there are significant legal differences between these structures, which can have major implications when it comes to taxation, litigation and ownership.

If you haven’t considered it previously, take a look at three advantages which incorporation (also known known as company registration) can bring.

1. The company owns assets, rather than you personally

Incorporating your company bestows it with its own ‘legal personality’. Just like an individual, an incorporated company can be taxed, own and dispose of assets or be held liable when things go wrong. If you’re a sole trader and end up in financial difficulty, your personal assets could be seized to bail out your business if you’re not appropriately insured. If your corporation is declared bankrupt, normally your personal assets will be protected.

2. Taxation benefits over being a sole trader

Corporate tax is set at a lower rate than individual tax, although any salary you draw from your company will be taxed at the individual rate. What this means is that by incorporating your business, it’s possible to potentially reduce your tax burden, providing more funds for growth and development.

3. More appeal to lenders and other organisations

Incorporated businesses tend to be viewed as being more professionally run and better established enterprises than sole trader outfits. Banks may view them more favourably when it comes to lending and in some cases customers may prefer to do business with an incorporated organisation.

Transforming your business from sole trader to a company requires thought, planning and legal expertise. If your small business is flourishing, or if you feel that corporate status would be beneficial from the minute you start trading, we can connect you with the right lawyer for you.

An experienced commercial lawyer can offer a wealth of information and support if you’re considering incorporation, guiding you through this process to maximise your chances of sustainable business success.

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