We come across many business owners who start off in business as a Sole Trader and then decide to switch to a Limited Company. Your goals change over time and once your business becomes established it’s quite often the likely scenario to make the switch to limited.

Why would you choose to go limited?

The main reason you would decide to take your business limited is due to the responsibility you have as a sole trader. Everything you earn from your business is classed as your own but the same goes for business debt. The business debt is your responsibility and as the business grows so does the risk, hence the reason for going limited.

There is less risk for you as a business owner if your business is limited.  The money the business makes belongs to the business and not you personally. Any money owed by the business is the debt of the business and not yours as a director. What you do need to be aware of is that with a limited company comes more responsibilities and admin, so make sure you do your research to find out if it really does suit you to make the switch.

So what do you need to know about making the transition?

To establish your business as a limited company you must incorporate your business with Companies House. This can be done online, if you need support we can help you with this. 

At this point you can choose to continue your business alone or you may wish to add other directors who will have shares in your business. Shares cannot be sold to the public, only to directors of the business. 

You’ll need to check that your business name is not already in use, you can do this by searching on Companies House. You may wish to take this opportunity to give your business a rebrand and use a completely different name, or just continue with the name you had for your Sole Trader business. 

Documentation

There are certain documents which you must have in place as a limited company. By law you must have set terms and conditions for your business. This helps to prevent any misunderstanding when it comes to your products and services and also gives you some protection. It’s advisable to seek advice from a solicitor when creating any new legal documents. 

Assets

Any assets you have as a sole trader will need to be moved across to the limited company if you wish to use them. This process can be quite complex so you may need to seek advice from us. 

Update correspondence

Any insurance you have in place will need to be moved into the name of your limited company to ensure that you’re still covered if the worst was to happen.

You’ll need to make contact with suppliers to ensure that invoices are in your limited company name and not in your own name. 

If you’re registered with the ICO you’ll also need to inform them too.

If you’re considering making the move from a sole trader to a limited company and would like some support then please book a call. We’d love to help you on your business journey.