Moving to a Limited Company with Tandem Business Solutions

When should my sole trader business move to a limited company?

By far this is the most popular query we receive on a regular basis. Also, there isn’t a answer that fits all of the enquires, they differ due to the different circumstances involved.

A good starting place would be to understand the difference between a sole trader and a limited company:

A Sole Trader is a self employed person who is the sole legal owner of the business, whose income is all the profit after the taxes and expenses are paid.

A Limited company is a business structure where it has its own legal identity and is separated from the directors and shareholders, thus becoming its own legal entity.

So now we can understand the difference let us consider the options:

Whilst a business is in its infancy it would possibly be prudent to remain a sole trader, especially when income and profits remain low. Registering as a sole trader is the easiest way to start a new venture without the hassle of being incorporated.

Once the business has grown and income and profits begin to flow in, the next natural step would be to become a Limited company.

Considerations for moving to a limited company

To assist us in making that decision it is worth looking at some of the potential benefits and potential drawbacks of doing so:


  • The Limited company is a stand-alone entity and as it says on the tin, the director’s liability should the business get into difficulties is limited. Limited by the amount of shares.
  • As a company you can bring on other people to assist in the company as directors or shareholders.
  • It could attract more bigger and more profitable clients who consider a limited status as more robust.
  • Selling shares can boost the company value.
  • Of course lets not forget some tax advantages as well. Directors can pay themselves dividends as well as a salary, which can be a more tax efficient way of receiving income.
  • A higher legal standing, which could be advantageous when seeking investment or funding.
    Access to a larger range of claimable expenses.


  • Way more paperwork and legal compliance to adhere to.
  • The director of a Limited company has legal responsibilities , that include:
    Safeguarding of company assets, decision making such as to stop trading if the company is running into difficulties and could not survive, and of course, do not forget the Companies Act, which Directors must adhere too.
  • Appointing a Bookkeeper or Accountant to complete Statutory Annual Accounts and the cost involved.
  • If employing staff having to consider your legal responsibilities as an Employer.

A Key word used throughout this blog is Responsibility.

Just because you are running a successful sole trader business it is not always the best decision to change the structure to a limited company. This is a really big decisions that could have major ramifications on ones life, so always seek professional advice whilst considering.

Are you ready to move to a limited company?

One question I always ask when approached with this query is “ Are you ready to do this?”.

Simply because at the end of the day it also comes down to what is right for the individual. I really want them to consider if they are ready for the responsibilities of running a limited company.  Will their lifestyle allow the required level of commitment? Are they still dipping their toes into the business world without a clear vision yet?

Where can you find help moving to a limited company?

So as we can see there is a lot to consider when making this massive leap. If done at the right time and for the right reasons the rewards can be what dreams are made of!

To discuss or find out more about the options and planning to moving to limited company, you are in the right place on our website: To book in a discovery call to see how we can assist you in making your decision, simply click on the Book a Call rght at the top of our website.

After all, our mission is To Empower Business Owners Around Their Finances.

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