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Sparrow Creative Freelance Graphic and W

Hello, my name is Peter, i'm a founder and freelance graphic designer at Sparrow Creative™ studio based in Ipswich, Suffolk.

I have been a freelance graphic designer and Brand identity expert for over 10 years, with

BA - Graphic & Brand Design, also a multiply certifications gained from Adobe, Google and London School of Design & Marketing.

The outcome reached is a unique point of difference to your brand, combining creative flair and expertise with marketing, advertising and branding awareness. The result is engaging, thought-provoking and effective design with a unique twist, providing an original solution for your brand or product.

© 2019 Sparrow Creative Studio. Web and Logo design in Ipswich, UK. 

Sparrow Creative Studio Ipswich

Registered Address: 

Handford Rd. Ipswich, Suffolk, IP1 2BF

01473 561 055

0783 533 2629

info@sparrow-creative.co.uk

If you’ve got an exciting new project and need my help,
submit your brief here and I’ll be in touch shortly to give you a quotation.
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Sole trader or limited company: which is best for you?


If you’re a sole trader, you may have heard that you can save tax by running your business through a limited company. This could indeed be the case, but there are many factors you should consider before you decide. Let’s take a look at the advantages and disadvantages of trading through a limited company.

Let’s not forget that both options have some positives and some negatives, it all comes down to an individual and it’s needs.


The change: two sides, are not the same!

When you’re a sole trader, you and your small business are legally one and the same. But if you turn your business into a limited company (this is also known as ‘incorporation’), the company becomes a separate legal entity from you. This legal separation can work as both an advantage and disadvantage of incorporation, as you’ll see.


Switching from sole trader to limited company could save you tax

There are indeed some tax savings to be made by making the switch from sole trader to limited company. Limited companies don’t have to make Income Tax payments on account, for example, but sole traders do. And while sole traders pay Income Tax on profits and classes 2 and 4 National Insurance, limited companies pay Corporation Tax on profits, which is a lower rate than Income Tax, and no National Insurance.


However, it’s important to bear in mind that limited companies are not entitled to a personal allowance, nor are the tax savings so significant since the taxation of dividends was changed in April 2016.


You could claim more tax relief on certain costs

When you run your business through a limited company, some costs are given more tax relief than they are for sole traders. For example, a limited company can pay for food and drink for employees (including you!) whenever they’re out and about on business. Sole traders, on the other hand, can only claim tax relief on these costs in certain circumstances (e.g. when the business trip involves an overnight stay).


Limited companies can attract investment more easily

If you are looking for investment in your business, incorporation could be an advantage for you. As a limited company, you will be able to sell shares in your business to an investor relatively easily. Sole traders, on the other hand, cannot seek investment, unless they go through the complex process of turning their business into a partnership.


You would have limited liability protection

Because a limited company is a separate legal entity from its directors, the company can own equipment, incur debts and pay bills in its own right. That means that if the company is sued, your own personal assets, such as your house and car, cannot be seized to pay the debt, unless you have given a personal guarantee to a company creditor.


Disadvantages of incorporation

Sole traders only have one document to file with government bodies each year: their tax return. However, a limited company has to file:

a full account

a confirmation statements

a Corporation Tax return


In addition, each director nearly always has to file a personal tax return to HMRC. If you are an employee of your company and take a salary, you will also have to register the company as an employer and set up a payroll.

All this means that after incorporation you will either have to spend more time preparing and filing paperwork, or you will need to pay your accountant more to do this for you.


Trading through a limited company involves potential tax costs

As the director of a limited company, you would no longer be able to draw money freely out of your business bank account. The company could pay you a salary, pay dividends on the shares you own, and reimburse you for any expenses you incur on its behalf. However, if you were to take money out of the company for any other reason, you may have to pay extra tax.


Another potential tax implication is that when a limited company makes a loss, it can only use that loss against its own profits. Sole traders, on the other hand, may be able to use any loss their business makes to save tax on their other income. For example, if a sole trader is also employed elsewhere, they may be able to use their business losses to reduce the tax they pay on their employment income.


As the director of a limited company, you will have legal duties to fulfil just like Sparrow Creative

Your legal responsibilities as company director would include safeguarding the company’s assets, and making the decision to cease trading if you knew the company couldn’t survive. If you fail in your legal responsibilities as a director, the consequences can be serious: you could be fined or even go to prison.


Limited companies have less privacy than sole traders

When you file your company’s accounts and Confirmation Statement, these documents will be in the public domain, available for anyone to see on sites such as duedil and companies house. This means that your figures will be visible to the public, along with your company’s office address (although you could make this your accountant’s office, rather than your own home).


Weighing up the pros and cons

As you can see, when it comes to deciding whether or not to incorporate your company, it’s not a clear-cut choice! The best choice for your business will depend on your own circumstances and should be discussed with your accountant.