Do I need a company?

Sole trader

As a sole trader you and your business are the same legal person. It is the simplest way to start: you register for Self Assessment with HMRC and keep your own records. The trade-off is that there is no separation between you and the business, so you are personally responsible for its debts.

Limited company

A private company limited by shares is a separate legal person from its owners. That brings limited liability, so in most cases your personal assets are protected if the business runs into difficulty. A company can also look more established to customers and suppliers, and can be more tax-efficient once profits grow. In return you take on more admin: filings at Companies House, a confirmation statement each year, and Corporation Tax.

A company is usually worth it when

• you want limited liability to protect your personal assets;
• you are taking on co-founders, investors, or shares;
• clients or suppliers expect to deal with a limited company;
• profits are growing and tax efficiency matters; or
• you want to protect your business name on the register.

A note on advice

Thucy gives you information to help you decide and handles the formation itself. It is not a substitute for tax or legal advice. If your position is complex, speak to an accountant before you incorporate.