What type of company should I form?

LizTon

I'm starting a side hustle running advertising on a website - would a limited company or sole trader be the best company to setup (will be well below the VAT threshold)

MSE_ForumTeam5

We've moved this to the small business board

Savvy_Sue

LizTon said:

I'm starting a side hustle running advertising on a website - would a limited company or sole trader be the best company to setup (will be well below the VAT threshold)

It depends, and no-one can really answer this for you. You need to understand the difference between the various options. 

As a Limited Company, the business is the company - the money in it is not yours, the debts incurred are not yours: they are the company's. 

As a sole trader, the business is yours - the money in it is yours, the debts are yours. 

You'll appreciate that running as a Ltd is therefore more complex, and there are strict rules to follow to register your company and to file your accounts. 

This looks like a good summary of the options. 

Veteransaver

If it's just a side hustle for now then start as a sole trader. It's far easier you just fill in a tax return
Whereas ltd company you need to file annual return at companies house. File ct61 tax return electronically, if you want any sort of wage you need to register for PAYE etc. So you'll need an accountant probably and it will be more expensive.

Bookworm105

LizTon said:

I'm starting a side hustle running advertising on a website - would a limited company or sole trader be the best company to setup (will be well below the VAT threshold)

a sole trader is NOT a company
please don't start off with a basic misunderstanding 

DullGreyGuy

LizTon said:

I'm starting a side hustle running advertising on a website - would a limited company or sole trader be the best company to setup (will be well below the VAT threshold)

A LTD is a company, it creates a lot more overhead because it's a legal entity in its own right. It does however create legal separation from you and your business so if it goes south then your assets are protected unless you've given personal guarantees on behalf of the company. 

Sole trader isnt a company, as everyone else has said. It's just you which means it's you personally entering into contracts, you need to identify yourself on official documents, websites etc. Accounting is much simpler on a cash basis which sole traders can do but companies can't. 

There can be some tax advantages on LTDs but it depends on your wider environment, earnings etc. Many start as a sole trader and later incorporate when things grow. 

Bookworm105

DullGreyGuy said:

There can be some tax advantages on LTDs but it depends on your wider environment, earnings etc. Many start as a sole trader and later incorporate when things grow. 

LTD v sole trader comes down to what is your overall income from all sources and as said above, starting sole trader is wisest

As a "side hustle" it is improbable the tax savings by taking the Ltd company dividend route will outweigh the running costs of being Ltd and the tax payable by the company itself. More tax efficient to be sole trader with low earnings