Setting up a new business - sole trader or companylimited & Insurance

EMPG
EMPG Registered Posts: 20 Dedicated contributor ? ? ?
Hi there,

Looking at D&O insurance cover where I work and trying to apply this to MIP and other professionals working for themselves, I asked myself a question:

In what basis you make the decission of being a sole trader or becoming a limited compamy?

My initial thought is: "if you dont want to grow too much then sole trader would be better because becoming ltd you have to comply with more paperwork and regulations". However later to that my thoughts were that does not really matter whether your revenue is enoughf to satisfy your needs or more than that but yo still at risk and then becoming a ltd will ease your liability in case things goes wrong.

And coming to the element of Insurance, if I have a good PI cover, why would I need to become ltd? And, if you are a ltd, would the PI cover be cheaper? And as owner dont you become Director? and so, do you need D&O cover toghether with the PI cover?

And together with all this, what is more convenient and/or tax efficient for the owner being a director of a limited, receiving compensation via salary or dividends? what if you are sole trader, isnt this more tax efficient however more risky in case any liability arises?

Thank you

Comments

  • cheapaccounting
    cheapaccounting Registered Posts: 77 ? ? ?
    There is a great thread on UK Business Forums on sole v limited company:

    http://www.ukbusinessforums.co.uk/forums/showthread.php?t=60813

    Just to add ....

    In my experience this is the top question asked by a client when we take them on - should I be a limited company or a sole trader.
  • EMPG
    EMPG Registered Posts: 20 Dedicated contributor ? ? ?
    Thanks Elaine, I thought that would be the "big" question, I will look into the link now.
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