Sole trader or company: the questions that decide

Search for this comparison and you will find dozens of tables of thresholds and rates. The trouble is that they expire. The thresholds changed again this year, they will change next year, and an article written two years ago can walk you into the wrong decision with complete confidence.

We confirm the figures that apply today, to your actual situation, in a short conversation. What follows are the questions that do not change — and that, in practice, decide more often than the numbers do.

1. Are you risking something you cannot afford to lose?

The most important difference is not tax, it is liability. As a sole trader you answer with your personal assets. With a company, liability is limited to the business, with its exceptions.

If the work involves large contracts, client advances, stock, supplier debt or any exposure to third parties, this question comes first. No tax advantage offsets it.

2. Does the money leave the business or stay in it?

If you spend what you earn each month, the calculation is one thing. If you want to leave money in the business to buy equipment, hire, or ride out a slow period, it is another entirely.

Many choose the form that looks better on paper in year one and discover in year three that it does not match how they actually use the money.

3. Are you staying on your own?

The sole trader form is built for one person working. The moment you want a partner, an investor or a team, a company becomes close to inevitable, and switching costs time and money.

Choose for the business you will have in two years, not the one you have this month.

4. Who are your clients?

Some large companies, institutions and platforms prefer — sometimes require — to work with companies. If those are the clients you want, the legal form stops being an internal matter and becomes a condition of entry.

5. What does administration cost you, in time and patience?

The sole trader form is simpler to run. A company asks for more discipline: documents, records, filings. The question is not which is more complicated, but whether the extra complexity buys you something you actually need.

What you will not find here

Numbers. Not because we do not know them, but because they move, and an article that prints them becomes dangerous exactly when it stops being updated. Thresholds, dividend rates, contribution caps — all have shifted recently, and more than once.

If you read a table somewhere, check the date on the article. If it has none, do not use it.

How we do it at Lexco

We do not give a general answer, because there is not one. We ask you the questions above, look at what you want to do over the next two years, apply the figures that hold today and tell you what we see — including when the answer is “stay as you are”.

The conversation takes fifteen minutes and commits you to nothing. If you are facing the decision, call us before you go to the registry, not after.