Are there disadvantages to working as a sole trader?

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Hello, I know there are quite a few benefits you can take advantage of if you register a limited company. That said, I’m still pretty happy as a sole trader. Rather than benefits, what are the real disadvantages of working as a sole trader? Are there any reasons I should want to stop trading in this capacity?

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When compared to a limited company, the main disadvantages of operating as a sole trader are:

  • You have unlimited personal liability for business debts
  • You cannot sell shares in a sole trader business in exchange for capital investment
  • A sole trader business cannot have more than one owner
  • A sole trader structure is not as tax efficient
  • Sole traders are not as highly regarded
  • Sole trader businesses are viewed as smaller
  • It can be more difficult to get finance
  • Some companies, especially in the financial services sector, will not do business with sole traders

However, these disadvantages may not apply to you. If you are happy with your current business setup, there is no need to change it. But if you are interested in the potential advantages of setting up a limited company, speak to your accountant or a professional business advisor.

a year ago
 

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