Practice No 6009
Starting up a new business
Being a sole trader is the simplest way to set up a one-person business, you get to make all of the decisions and of course you get to keep all of the profits. However, as a sole trader you are personally responsible for any debts run up by your business, which could mean that your home or other assets are at risk. Upgrading your business status (or “incorporating”) to that of a limited company will mean tougher legal, financial and administrative implications.
Having said that, a limited company status offers protection of your assets should you get into financial trouble - your liability is limited to the cost of the shares. Trading as a limited company offers other advantages such as easier securing of funding from your bank. In addition, it is often thought of as more prestigious by customers or suppliers.
The decision on whether to start your own business is one that should be taken having taken sound advice from independent advisors, this guide is not intended as being a basis for making such a decision, rather an insight into the requirements and obligations that you will be under having made that decision.