Having a ltd company but want to work as a sole trader

trigger6048

Hi all,

I'm moving into freelance consultancy in April.  A while ago I set up a limited company with a dormant status, mainly to secure a good name.   As it's my first year I don't want to get too bogged down in the accountancy stuff if possible.  My question is could I keep the company dormant and use the name as a sole trader without the limited on the end or would i be breaching any rules?

I'm expecting a fairly small revenue this year c.50k and so there doesn't seem to be a huge difference tax wise when I do the calcs.

Any help appreciated!

DullGreyGuy

You can if your clients are happy dealing with you as a sole trader. 

The only one that can have an issue with you of cloning a name is going to be the company and presumably you arent going to raise any concerns with yourself? May be different if the company had trading history and therefore there could be accusations from customers of you trying to deceive them.  Just remember that contracts have to be in your name not just the trading style. 

Grumpy_chap

trigger6048 said:

Hi all,

I'm moving into freelance consultancy in April.  A while ago I set up a limited company with a dormant status, mainly to secure a good name.   As it's my first year I don't want to get too bogged down in the accountancy stuff if possible.  My question is could I keep the company dormant and use the name as a sole trader without the limited on the end or would i be breaching any rules?

I'm expecting a fairly small revenue this year c.50k and so there doesn't seem to be a huge difference tax wise when I do the calcs.

Any help appreciated!

You can do as you suggest

In making the decision between operating as Ltd Co. or sole trader, you may wish to consider:

• Will your prospective customers be businesses or private individuals?  (This might also influence whether you wish to voluntarily register for VAT.)
• Will your prospective customers be willing to trade with a sole trader?
• What might your future revenue be?  You note a target of £50k in the first year.  Is there a turnover target in future years at which you would suggest converting to Ltd Co rather than sole trader?  It may not always be wholly straightforward to switch from sole trader to Ltd Co.  Clients may not wish to onboard the new organisation.  Business insurances may not transfer or may need to be retained for the previous operating business as well as the new operating Ltd Co.

I note the desire to avoid getting involved in Accountancy stuff unnecessarily.  Don't forget that the dormant Ltd Co will require dormant accounts to be submitted.

trigger6048

Thanks both, really useful and food for thought

koru

There may not be a lot of difference in the "accountancy stuff". You will still need accounts as a sole trader, for HMRC. If you hire an accountant to prepare these, the incremental cost to file statutory accounts is likely to be negligible. If you are planning to do your own accounting, then if you use Mettle as your bank account you get free use of FreeAgent accounts software, which will create the statutory accounts for you.

MeteredOut

Grumpy_chap said:

trigger6048 said:

Hi all,

I'm moving into freelance consultancy in April.  A while ago I set up a limited company with a dormant status, mainly to secure a good name.   As it's my first year I don't want to get too bogged down in the accountancy stuff if possible.  My question is could I keep the company dormant and use the name as a sole trader without the limited on the end or would i be breaching any rules?

I'm expecting a fairly small revenue this year c.50k and so there doesn't seem to be a huge difference tax wise when I do the calcs.

Any help appreciated!

You can do as you suggest

In making the decision between operating as Ltd Co. or sole trader, you may wish to consider:

• Will your prospective customers be businesses or private individuals?  (This might also influence whether you wish to voluntarily register for VAT.)
• Will your prospective customers be willing to trade with a sole trader?
• What might your future revenue be?  You note a target of £50k in the first year.  Is there a turnover target in future years at which you would suggest converting to Ltd Co rather than sole trader?  It may not always be wholly straightforward to switch from sole trader to Ltd Co.  Clients may not wish to onboard the new organisation.  Business insurances may not transfer or may need to be retained for the previous operating business as well as the new operating Ltd Co.

I note the desire to avoid getting involved in Accountancy stuff unnecessarily.  Don't forget that the dormant Ltd Co will require dormant accounts to be submitted.

I would also add, might you need the "Limited Liability" aspect of having a Ltd company? ie. could your line of work lead you to being personally liable for any claims, putting your personal possessions at risk?