{"id":1739,"date":"2022-01-13T05:12:42","date_gmt":"2022-01-13T05:12:42","guid":{"rendered":"https:\/\/uk.legalvision.com.au\/?p=1739"},"modified":"2025-07-02T00:42:05","modified_gmt":"2025-07-01T23:42:05","slug":"operate-as-company-or-sole-trader-in-england-and-wales","status":"publish","type":"post","link":"https:\/\/legalvision.co.uk\/business-structures\/operate-as-company-or-sole-trader-in-england-and-wales\/","title":{"rendered":"Should I Operate as a Company or Sole Trader in England and Wales?"},"content":{"rendered":"

Many small business owners first operate through the sole trader structure and later convert their business into a company. If you are looking to start a business, you may be wondering what the difference is between operating your business as a sole trader and through a company. This article will explain the main distinctions between the two legal structures available to many businesses and explain the advantages and disadvantages of both.\u00a0<\/span><\/p>\n

Overview\u00a0<\/span><\/h2>\n

Under a sole trader structure, your business has no separate legal personality from you under a sole trader structure. However, if you trade through a company, your business is its own legal person.\u00a0<\/span><\/p>\n

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The principal effect of this is that if you trade as a sole trader, you will have unlimited liability for all of your business\u2019 debts and obligations. <\/span><\/p>\n<\/div>\n

Therefore, if your business cannot pay a creditor because it does not enough assets, a court can order you to sell your personal assets, like your car or house, to cover the difference.\u00a0<\/span><\/p>\n

Under a company, in most cases, there is a wall between you and your business. Thus, you limit your liability to the number of shares you have in your business. Therefore, barring fraud or breaching your duties as a company director, creditors will only have recourse to your company\u2019s assets if your company cannot meet its obligations. They cannot come after you in your personal capacity.\u00a0<\/span><\/p>\n

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However, the main disadvantage to running a business through a company is that company officers such as directors have significant administrative and legal obligations.<\/span><\/p>\n<\/div>\n

Sole Traders<\/span><\/h2>\n

Creation<\/span><\/h3>\n

The law recognises a sole trader business structure automatically under certain circumstances.\u00a0<\/span><\/p>\n

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If you start to do business of any sort on your own (such as yard care, selling crafts, or babysitting), the law will imply a sole trader structure unless you have taken steps to incorporate it into a company.\u00a0<\/span>Therefore, you do not need to file any application with any government body to begin trading as a sole trader.\u00a0<\/span><\/p>\n<\/div>\n

However, you may be operating under a general partnership if you do business with another person, especially where you and the other party act jointly and share the obligations and profits. If this is the case, a different set of laws will govern the administration of your business.\u00a0<\/span><\/p>\n

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It is always possible to convert your sole trader business into a company later.\u00a0<\/span><\/p>\n<\/div>\n

Key Features\u00a0<\/span><\/h3>\n

A business operating as a sole trader will have:<\/span><\/p>\n