There are several main reasons for going Ltd, here are the ones we looked at:
1. As a sole trader if you are making a good profit (currently over £36,400) then you will hit the upper tax limits and start paying 40% on your earnings. However, if you are a ltd company then you pay yourself a weekly/monthly salary at basic rate tax and take the remainder as a dividend from the business and pay corporation rate tax on it at 20%, hence there is an obvious tax saving reason for going ltd if you are hitting the upper tax levels.
2. If the business goes t!ts up, then as a sole trader you are liable for all debts and you could lose your house, savings, assets as a result. However, as a ltd company you as an employee/director of that company are safe(ish!)
3. If you are dealing with commercial, then there is "possibly" more credence in your business if you are ltd, when people see ltd, they thing you are a big safe business, the reality may be completely different!
4 As a sole trader you just need to put a tax return in every year declaring your earnings, which only the taxman gets to see. However, as a ltd company you need to submit a full set of accounts to Companies House each year, which every man and his dog can see (for a small charge). The costs of preparing a set of accounts are obviously a lot more expensive than simply getting your accountant to do your tax returns. As far as I am aware auditing is not required anymore for private ltd companies.
We went ltd last year and for us it was a no brainer, if you are a one-man band then it will be a tougher decision, get an accountant to look at your accounts and he should help you make a decision.
