Sole trader or limited

[-Chris-]

If you have already made the choice, did you go sole trader or limited? What made you choose one over the other?

 

[Mr D]

Limited - initially for the tax and employment benefits.

 

[-Chris-]

Thanks, what are those benefits please? This would be just for a one person company.

 

[billmccallum1957]

Limited, mainly for the liability aspects.

 

[Mr D]

Thanks, what are those benefits please? This would be just for a one person company.

Employment benefit of being employed - my income is wages, not profit.

 

[-Chris-]

I would imagine higher bank charges need to be considered as well.

 

[Mr D]

I would imagine higher bank charges need to be considered as well.

Really?
Banks do higher charges for one type of business over the other?

 

[-Chris-]

Really?
Banks do higher charges for one type of business over the other?

Not quite, but with a ltd company you need a business account, which does incur higher charges than if you had a personal account on a sole trader basis.

 

[Mr D]

Not quite, but with a ltd company you need a business account, which does incur higher charges than if you had a personal account on a sole trader basis.

Trading a self employed business through a personal (free) account, the bank can close down the account and require you to open a business account.
If they don't notice then can keep the personal account.

The business account I have the charges are peanuts and I had a year free. If I wanted to I could switch between banks and get free banking for years.

 

[-Chris-]

Trading a self employed business through a personal (free) account, the bank can close down the account and require you to open a business account.
If they don't notice then can keep the personal account.

The business account I have the charges are peanuts and I had a year free. If I wanted to I could switch between banks and get free banking for years.

It's very simple to have low bank charges on a bank account as a sole trader, but, I haven't come across any business banking where the charges were 'peanuts' - what do you class as 'peanuts' ?

 

[Mr D]

It's very simple to have low bank charges on a bank account as a sole trader, but, I haven't come across any business banking where the charges were 'peanuts' - what do you class as 'peanuts' ?

Peanuts?

£7.50 a month.
Used to pay more than that for my personal account with TSB bank years ago.

The other reasons for setting up a limited account are worth far more than that.

 

[-Chris-]

I don't pay any account charges on any of my personal accounts. Do you pay anything else to your bank apart from the £7.50pm? If not, then that isn't too bad, and probably the exception rather than the rule.

 

[Mr D]

I don't pay any account charges on any of my personal accounts. Do you pay anything else to your bank apart from the £7.50pm? If not, then that isn't too bad, and probably the exception rather than the rule.

Free banking is a modern thing for personal accounts, back in 1980s we paid for personal accounts.
No, nothing more than £7.50, I don't use additional services.

Bank charges are a LOT less than the difference in accountancy fees between limited and self employed businesses. And can be tiny compared to possible liability protection a limited company can give you.
Self employed business fails the person is left holding the debt in full as its their debt. Limited company business fails then unless there's a personal guarantee or certain problems are found on investigation then the debts do not belong to the director.

 

[Alan]

but, I haven't come across any business banking where the charges were 'peanuts' - what do you class as 'peanuts' ?

My business account is free - but unfortunately I don't think it is available any more.

There are plenty that are free for 2 years though.

 

[DontAsk]

Free banking is a modern thing for personal accounts, back in 1980s we paid for personal accounts.

You might have been foolish enough to do so. I never did, from 1981 until just a few years ago.

If anything, free banking is becoming a thing of the past. I now get a better deal by paying but receiving interest and cashback that more than offset the costs.

 

[Mr D]

You might have been foolish enough to do so. I never did, from 1981 until just a few years ago.

If anything, free banking is becoming a thing of the past. I now get a better deal by paying but receiving interest and cashback that more than offset the costs.

What suits you doesn't suit everyone. Most of the benefits paid accounts have are not used to their full extent by people, the banks make money from those accounts overall. And in your case you benefit more than the costs.

I still use the free banking.