Whether you are just starting out in business and wondering if you should be a Limited Company or a Sole Trader, or you are already in business and are considering being a limited company, it’s important to ‘weigh up’ the benefits and disadvantages of each. This will help you select the structure that best fits with your goals, your ability to absorb risk, and your long-term plans for the business.

Here are just some of the Pros. and Cons. of being a sole trader versus a limited company.

The sole trader:

Pros:

• After taxes, you keep all of your earnings.

• The administration process is straightforward.

Cons:

• Unlimited personal liability for the company

• Could lose personal assets, e.g. your car or home in the event of a crisis.

The limited company:

Pros:

• Limited responsibility for business debts

• Individual assets are safeguarded.

Cons:

• More costly to operate

• Administration involves paperwork that takes a lot of time

Choosing the right structure is a critical decision which you must consider carefully as it can have a significant impact going forward. If you speak with us, we will take you through the benefits and the disadvantages of each for your particular situation and help you make the right decision for your business.

Companies House and HMRC are both government agencies that play an important role in the UK economy. Companies House is responsible for registering and incorporating companies and maintaining company records. HMRC, meanwhile, is responsible for collecting taxes and administering tax laws.

When you start a business in the UK you must register your company with HMRC and Companies House and if you are a sole trader, you only need to let HMRC that you are self-employed and will be submitting a self-assessment.

• If you have a limited company, you will need to provide HMRC with your company registration number, as well as your VAT registration number if you are registered for VAT.

• Companies House will need information about your business, this includes your company name and registered address, details of the owners (directors and shareholders), and information about the company’s share capital and a description of what the business does (SIC code)

• After the end of its financial year, your business must prepare annual accounts and if your business is Limited you must prepare a Company Tax Return, if you are a sole trader then your profits are recorded and submitted on a Self-Assessment tax return.

Companies House also requires that your limited company submit an annual return or Confirmation Statement. Your annual return will include:

1. Contact details including your company’s registered address and the ‘single alternative inspection location’ (SAIL) – the address where records are kept if not at the registered address

2. Information about the directors and company secretary (if your company has one) including name, date of birth and nationality

3. Your company’s principal business activities – you’ll need to choose at least one activity from a list of standard industrial classification (SIC) codes to explain what your business does

4. The type of company (eg private or public), information about the shares issued by the company and in some cases details of your shareholders.

At the heart of any business is accurate bookkeeping and keeping on top of your records. This is very important when becoming Self-Employed, as you will be dealing mainly with cash transactions. You need to keep full and accurate records of all the money that comes in and goes out of your business.

Working with Hospitality Accounting Solutions we will maintain your accounts and prepare and submit all the relevant returns and updates as they are required by all statutory bodies. This will give you peace of mind and let you get on with developing your business.

PAYE:

As an employer you will pay staff wages, which means that you need to ensure that the staff are paying the correct amount of tax and national insurance (PAYE) and that this is withheld from their wages. On top of the deductions from your staff’s wages you the employer have to add an additional employer contribution (as of April 2025 it is 15% on earnings over £5,000). You are then responsible for paying both employee tax and the employer contribution to HMRC on a monthly basis or it can be quarterly.

Pensions: Automatic Enrolment

If you employ staff they must be enrolled in a pension scheme, (they can ask not to be included). Currently at 2025, employees pay 5% of earnings over £120 and as the employer you contribute 3% of earnings over £120. You are then responsible for submitting a monthly return showing earnings and contributions and making those payments to the pension provider. The system is monitored by the Pension Regulator who will issue fines for non-compliance.

VAT:

As of 2025 if a business exceeds £90,000 of turnover in the year, it must register for VAT. You then are obliged to add 20% VAT to everything you sell (certain items are not vatable) ie the customer pays the vat.

Then on a quarterly basis you will have to pay to HMRC the VAT you have collected from your customers, less the VAT you have paid when paying for supplies and expenses for your business (not all supplies will have VAT on them ie food).

NISRA: Northern Ireland Statistics and Research Agency

Businesses are legally required to submit forms such as the Annual Business Inquiry (ABI), Quarterly Business Survey (QBS), Business Register and Employment Survey (BRES), and Annual Survey of Hours and Earnings (ASHE) to NISRA.

The ICO: The Information Commissioners Office

When you start a business and your business processes personal data on staff, customers or suppliers then you need to inform and register with the Information Commissioner's Office (ICO), paying a data protection fee, unless you meet an exemption.

If you choose to use Hospitality Accounting Solutions we will take away the admin burden from you, processing your invoices, preparing and processing your tax returns, taking care of all of the returns that the business is obliged to make, ensuring that these are done on time and done correctly, saving you getting late penalties and fines.

We will process your payroll, making sure that the staff are paid correctly, that they pay the correct amount of tax, that their pension contributions are made and that holidays and sick leave are all processed correctly.

We will monitor your business, and keep you informed via monthly reports on performance and in particular cash flow projections. This will ensure you can make the best decisions on managing your business for success.