Ep01 - Thinking About Going Limited?

Thinking of switching from sole trader to a Limited company? In this opening episode, Nicola tackles one of the biggest questions small business owners face: whether to incorporate. 

She breaks down the differences between trading as a sole trader and operating as a Limited company, covering tax planning, liability protection, ownership structures, and director responsibilities. 

Nicola explains the pros and cons in plain English and offers guidance on deciding when the timing is right. Whether you’re a self‑employed professional, a consultant, or running a growing company, this episode will help you weigh up the benefits and obligations of becoming a company director. If you’ve typed “Should I go Limited?” into your search bar, this conversation is for you.

What You’ll Learn:

•           The differences between sole trader and Limited company structures.

•           How tax, liability, and ownership change when you incorporate.

•           Key questions to ask before deciding to form a Limited company.

Resources & Links:

I’ve written a book that expands on the topics in this podcast and comes with a companion guide. Learn more at www.thenumbersquarter.co.uk/book.

About the Podcast:

The Balanced Business – The Director’s Handbook is a 12‑part podcast series hosted by Bedford‑based Chartered Accountant Nicola Hageman. Designed for UK small business owners and company directors, the podcast explains how to run a Limited company with more clarity, confidence, and control. Each episode covers a practical topic – from choosing your business structure and staying compliant with HMRC to budgeting, VAT, systems, and delegating. The series is based on Nicola’s book and companion guide, available at www.thenumbersquarter.co.uk/book.

About Nicola and The Numbers Quarter:

Nicola Hageman is the founder of The Numbers Quarter, a friendly and approachable accountancy practice based in Bedford. She specialises in helping owner‑managed businesses grow their profits, plan for the future, and reduce stress. Nicola is known for her plain‑speaking advice and passion for aligning personal and business goals.

Connect with Nicola:

• Instagram – www.instagram.com/nicola_hageman
• LinkedIn – www.linkedin.com/in/nicolahageman
• Website – www.thenumbersquarter.co.uk

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Transcript

0:03

Hello and welcome to the Balanced Business Podcast. I'm Nicola Hageman from The Numbers Quarter, and this is the very first episode of the Director's Handbook series. So whether you are just starting out with business or you've been running it for a while and you are thinking about taking the next step. This series is designed to help you understand what it really means to run a limited company in plain English. No jargon, no overwhelm, just clear, practical guidance. And in this first episode, we are starting right at the beginning with a question I get asked all the time, should I go limited? Is it the right move for me and my business? Now there's no single right answer to that. It really does depend on your circumstances. But what I wanna do today is talk you through what going limited actually means when it makes sense to do it and when maybe it doesn't, and help you get clearer on what is right for you. So what does going limited actually mean? Let's strip it back. When you set up as a sole trader, which is how a lot of people start, there's no legal distinction between you and your business. You are the business. You earn the income, you pay the tax, and you are personally liable for any debts or issues. But when you set up a limited company, you are creating a separate legal entity. The company is its own person in the eyes of the law. it has its own name, its own bank account, and crucially its own responsibilities. And you as the owner, become the director and a shareholder. You still run the business, but now you are doing it as an officer of the company, and that changes a few things. Legally, financially, and sometimes even psychologically. So why do people do it? Why bother going through all the extra steps, dealing with more paperwork and taking on more responsibility? Well here are a few of the main reasons. First, and probably most importantly, there's limited liability. So that means if something goes wrong in the business, say a big debt, a legal issue, a contract dispute, you are not personally on the hook unless of course you've done something dishonest or reckless. So your personal assets like your house or your savings are generally protected. Now, I say generally because there are exceptions, but as a structure, it's designed to create a bit of safety net between you and the business. And next there is the potential for tax efficiency. And I say potential because it's not guaranteed, but depending on how much profit your business is making, you might end up paying less tax through a limited company structure than you would as a sole trader. This usually happens because you can take a combination of salary and dividends and dividends are often taxed at a lower rate. You can also time your dividends a bit more strategically. Whereas with a sole trader, your income is your income. You get taxed on what you earn. There's also the professional image factor. Some industries, not all, but some see limited companies as more established, more trustworthy. And if you're looking to work with bigger clients, or you're pitching for contracts, being a limited company can open a few more doors. And finally, having a limited company can give you clearer financial boundaries. You set up a business bank account, you separate your finances, and you get more visibility over what the business is earning and spending. And that in turn makes it easier to plan, to make decisions, and to sleep at night. But it's not all sunshine. There are some trade offs, so I'm not here to sugarcoat it. There are definitely some extra responsibilities that come with being a limited company. The first is admin and compliance. You need to file annual accounts with companies house. You'll have to submit a corporation tax return to HMRC, and there are deadlines to meet, formats to follow. And if you miss something, you can be fined. Now, this isn't meant to scare you, but it is something to take seriously if you are organized or have an accountant on your side. It's very manageable, but it's not something that you can ignore. There's also less privacy. Your company details, including your name as a director and your registered office address are publicly listed on company's house. Some people are absolutely fine with that, and others would rather keep a lower profile. You will also need to keep a separation between your personal and business money, and this is one that really trips people up. Just because you own the company doesn't mean that you can treat the company bank account like your own. The company's money belongs to the company and you need to pay yourself properly, but more on that in a later episode. And finally there is just a bit more complexity overall. You probably still need to do a personal tax return, even though the company does its own tax return too. So you've got two layers of finances to manage the companies and then your own. So how do you know when it's the time to make the move? Here are a few signs that's going limited. Might be a smart move for you, you are starting to make consistent profits and your earnings are getting into the 30 to 40,000 pound a year range. If you want to protect yourself legally, maybe you're signing contracts, hiring people, or taking on risk. You're planning to grow, and you want to build a business that can eventually operate without you doing everything, and you're starting to feel the limits of sole trader structure, maybe around tax, maybe around image, or maybe just around the way that you want to build your business. If any of that sounds like where you are at, it's probably time to explore it properly. Now, that doesn't mean rush, but it does mean learn, ask questions and make a plan. Okay, so when might it be better to wait? Now, let's be really honest. Not everyone needs to go limited straight away.. If you're just starting out, if you're just testing an idea or your earnings are still quite modest, let's say under 25,000 pounds a year,, then it might make sense to stay as a sole trader for a little while. It keeps things simple. It's easier to manage, and if things change quickly, which they often do in the early stages, you're not committed to a more complex setup. There's also the entry factor. If you're already feeling overwhelmed, if you don't have time to learn the rules or to keep records and you're not ready to pay for support, then adding more layers might not be helpful just yet. You can always go limited later. It's not a now or never decision. What matters most is that you are making the decisions consciously, not just because someone told you to. What about if your clients have said that you have to be limited? Now this does come up a lot, especially with contractors or freelancers. Sometimes a client will say, we only work with limited companies,. And if you are left, wondering if that's true or fair or even legal. Well, the answer is, it depends. In some cases, clients want the limited liability and clear contracts that come with working with a company rather than hiring someone as an individual. And that's fine. And if that client is key to your business, it might make sense to go limited to meet their requirements. But sometimes clients are trying to offload risk or avoid playing employment taxes, and that's where IR 35 comes in. So this is a set of rules that stops people setting up limited companies just to avoid tax when they're essentially employees. Now, if that's something you're facing, please do get advice. It's not black and white, and the consequence of doing it wrong can be expensive. But the key point here is don't be pushed to go limited If you don't understand why. Ask questions, get clarity and make sure it's right for you. So if you're still unsure, here's a quick way to start thinking it through. Ask yourself, how much profit am I consistently making? Not turnover, but actually bottom line profit. What kind of risks or liabilities am I exposed to in the work that I do? Am I planning on growing the business and what do I want it to look like in one, three or five years time? Do I want to build something bigger than just me, or do I want to keep things lean and simple for now, and perhaps most importantly, do I understand what being a director actually means, because that comes with legal responsibilities, which we're gonna talk about in the next episode. If these questions get you thinking, that's a good thing. This decision is a big step and it's worth taking the time to get it right. So going limited isn't all about status. I. It's not a badge of honor, it's just a legal structure and like any structure, it needs to fit what you're building. For some people, it's exactly the right move. For others, it's better to wait, and for most, it helps to talk it through with someone who gets it, not just technically, but practically. And that's why working with someone like me or another approachable accountant can really make the difference because it's not about forcing you into a decision. It's about helping you understand the implications and supporting you through the setup, the transition, and the growth that comes with it. So thank you for being here on the first episode of the Balanced Business Podcast. I do hope that it's helped you feel clearer and more confident about whether going limited is the right move for you. So in the next episode, we are gonna talk about how to set up your company in the right way, not just legally, but in a way that supports your future growth and keeps you outta trouble. So if you found this helpful, please hit follow or subscribe so that you don't miss what's coming next. I'm Nicola Hageman from the Numbers Quarter, and I'll see you next time.