Do I need to set up a company or can I trade as a sole trader?

Sole trader

  • Advantage: It is relatively easy to start a business as a sole trader compared to setting up the company. You do not need to go through a legal process or to register your business with a government agency. You just declare income on your personal tax return.
  • Disadvantage: A sole trader does not have any special legal status, which means the owner is personally liable for what the business does. If the business gets into debt or legal trouble, so does the owner.

Company

  • Advantage: Company may protect your personal assets against creditor if things go wrong unless you have given a guarantee. There are tax benefits from operating as a company and a company and can seem more commercially professional.
  • Disadvantage: It will cost you more to run as a company than as a sole trader. You will have to regularly submit paperwork to the Companies office.