Changing your business status from a sole trader to a limited company is a significant step for any professional - and it can be challenging to pinpoint exactly when the time is right.
There's no one-size-fits-all when it comes to working for yourself. Being your own boss could mean you're a seasoned contractor, freelancer or even in sole possession of your retail venture.
For many independent professionals, being a sole trader provides the right career trajectory, work freedom or lifestyle benefits they're looking for. For others, it's a stepping stone to growing your business venture.
Transitioning from a sole trader to a limited company is a notable change for you and your business, and one that comes with a number of benefits and considerations.
Here are 5 reasons the time might be right for you to make the change - and what other options are available to you if it isn't.
Unless becoming a limited company was always in your business growth strategy - or an obvious next step for you - you might also want to look closely at what other options are available to you.
If a limited company doesn't sound like the next natural step for you and your venture, what other options could you consider?
Partnership. Formed of two or more professionals, a partnership holds many similar legal, financial and administrative benefits to sole trader status and can make it feel like a simple evolution of your business.
As with most pros there are cons, and this lack of formality can certainly be one of them. Another big consideration? A partnership makes all parties liable for any debt accrued within the business, and if one partner isn't able to pay what is owed, the amount will automatically fall to the remaining.
Limited Liability Partnership. Known as an LLP, this is often an intermediary step before deciding to become a limited company. It will mean you're registered under Companies House, aren't personally liable for debt, and will provide more financial separation.
As for the cons, becoming an LLP can be complex and time consuming, and that doesn't necessarily stop when the process is complete. You will likely need to complete more director duties than before, and there's corporate tax to consider.
If changing your status from a sole trader to a formally recognised limited company sounds like the right decision for you, you're already well on your way to growing your brand venture. Safenetpay supports a whole host of professionals - sole traders, SMEs and more - with their business finance. Meaning it could be the perfect fit for your new limited company.