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Moving Sole Trader to Limited Company

Sole Trader may want to change their unregistered company status to limited company. There are various reason sole traders transfer their company legal structure. Limited (ltd) company provide more credibility to customers than sole traders status. Banks looks more favorable at ltd company which provide more accessibility when looking to borrow money.

ltd status provide more security to business owner by limiting their personal liability for company debts.


ltd pays corporation tax which current rate is 19% and It is flat rate for all the profit, It will not change whatever the profit you make. However, sole traders are taxed at their earnings;

higher rate sole traders have to pay 40% tax on profit above £50k.


Ltd company allows you better tax planning such as director can adjust their annual salary less than £9,500 which allows no tax and NI to be paid. They can take £2000 dividend without paying any tax. They can put more money into pension anytime during the year saving income tax plus corporation tax.


ltd company comes with addition responsibilities such as filling accounts to company house and corporation tax to HMRC. Submitting confirmation statements.


It is advisable to talk to an Accountant which can provide you better advise according to your needs. S K Punia Accountant have many years of experience providing advice on sole traders to ltd company change.


Once you have decided you want to convert your business into Ltd Company. You need to

decide your company name. It can be the same name as your sole trader business name but it will carry Ltd end of the name. For example sole trader business name ''Ilford Accountants'' will be changed to ''Ilford Accountants ltd''.


Secondly you need to check with company house regarding your company name rules


Thirdly, you need to appoint at least one director and one shareholder. You will also need to find PSC (People with significant control). Anyone with more than 25% of shares or voting rights in the company is PSC.


Fourthly, you need to prepare A memorandum of Association and Articles of Association.


Finally, Once you gather all the above information you will be able to register with company house online. Usually, company house takes one day to process all the information.


Once registered, open company bank account as it will allow you to keep your personal and business expenses separate.


Similar to sole trader, you will need to keep record of all the expenses and income.


Registering a company can cost from £100 plus.


I hope the above information will be useful for you to prepare necessary documents and making decision regarding changing to limited company. Please feel free to browse through our other blogs.


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