Sole Trader or Limited Company? What’s the best option for structuring your business in Guernsey? Read our definition here to see which business best suits your needs.
A sole trader is a self-employed person who owns 100% of their business. There is no differentiation between the assets (and liabilities) of the business and the individual.
A limited company is a separate legal entity in its own right – effectively it is a separate person to the owners (shareholders) and managers (directors). This is the case even if there is a single shareholder / director.
Advantages of Sole Trader
- To start trading as a sole trader is quick and easy, registering with the Revenue Service the only requirement;
- There is no need to file a separate tax return – all business related income is included in your personal tax return;
- There is less bureaucracy and administration, without the need to register and complete annual validations.
Disadvantages of Sole Trader
- Any debts and liabilities incurred in the course of business are attributable to the owner, which could result in loss of personal assets to cover liabilities incurred by the business;
- Raising finance can be harder for sole traders, as banks and financial organisations sometimes prefer dealing with limited companies;
- All profits are taxed as if it is in the hands of the owner.
Advantages of Limited Company
- A limited company protects the shareholders – limiting the liabilty of the shareholders and protecting their personal assets which remain separate to the company’s;
- Income Tax in Guernsey for many companies is currently 0%, so only money distributed from the company to the shareholders is taxed;
- Company names are controlled, so no-one can register a company with the same name;
- Limited companies offer a more professional appearance, adding
Disadvantages of Limited Company
- There are more responsibilities for limited companies, included annual filings with Guernsey Registry and directors’ fiduciary responsibilities to the company;
- There is some public information available about your business via the Guernsey Registry website.
Ultimately the nature of your business and your personal circumstances will play a large part in deciding which approach is best for you. If you would like some advice please call us or email us for a free consultation.
The Information on this website is intended for guidance only. It is based upon our understanding of current legislation and is correct at the time of going to press. No liability is accepted by Evans Bond Limited for actions taken in reliance upon the information given and it is recommended that appropriate professional advice should be taken.