Moving Sole Trader to Limited Company

Moving sole trader to limited company can seem like a daunting task, but with the correct guidance, it can prove very beneficial. Planning for moving should be in conjunction with an Accountant with a Tax skillset.

Limited Liability.

Limited Liability is one of the most important provisions made within the 2014 Companies Act. It is granted to businesses under certain conditions. Limited liability is defined as “the 

Moving from Sole Trader to Limited Company

shareholders’ liability, should the company fail, is limited to the amount, if any, remaining unpaid on the shares held by them” This protects Shareholders personal assets for example if the company is forced into winding down from overtrading, or if a Creditor calls in the Debt where the company does not have the ability to pay the Debt.


In the event that the sole trader (person) cannot continue in the business, the business can continue to trade under a Limited Company structure. Within this structure there are other officers (Director and Secretary & Shareholders) who can continue to trade and keep the company compliant. An example of this is where an officer or shareholder dies, the company can continue, this is not the case in a Sole Trader situation.

Separate entity for legal challenges.

If a third party takes legal action against a Sole Trader, this is against the person, and the personal assets are at risk where there is a judgement against them. With a Limited company, as the company is a separate legal entity, the Shareholders and Directors are protected.

Ability to finance and borrow through banks and issue of shares.

Moving Sole Trader to Limited Company provides for the ability of the company to raise finance either through the Selling of shares, or through finance from the bank. Its the company’s performance that is assessed by the bank as a contributory factor of the success of granting support.

Tax Perspective.

When certain financial thresholds are met, it can be more efficient to convert from a sole trader to a Limited Company from a tax perspective.

How your viewed by your publics.

Publics being, Suppliers, Creditors, Banks, Customers can all perform due diligence on your company through the Companies Registrations Office. This can affect decisions that prospect clients, lenders, business partners in general make on your company be they positive or negative.

Protect the Limited Company Name.

When registering a company on the Companies Registrations Office, the limited company name is protected once it is registered. No one can register that same name or a similar name. There are rules laid down on this and how it works.