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By Nusrat Qureishi, Senior Associate

A friend of mine has worked as a mobile hairdresser for a number of years, which provided her with flexibility when her children were young.  Now they are older – and with a loyal client base - she is looking to fulfil a long-held dream of owning her own salon and employing staff.  Up until now, she has been a sole trader, so asked for some guidance on running her business as a limited company.

The biggest difference is that a sole trader is owned and controlled by one person who has unlimited personal liability for the business, whereas a limited company will have its ownership split into shares. The shareholders of a limited company have limited liability for the business, meaning there is less personal monetary risk involved.

A limited company can offer increased liability protection and potential tax and cash flow benefits, especially if the aim is long term growth. In addition, the finances of the company will be separate from your own.

  • As director of a limited company, you can choose how and when to pay yourself. With dividends having a lower tax threshold than salaried pay, this can mean you are much more tax-efficient than when just paying yourself a salary.
  • All shareholders have a limited liability should your business incur losses or debt; it’s not your personal responsibility.
  • Should you ever wish to leave your business, there are likely to be more opportunities for a clean break from a limited company.

Running a business with staff and premises will take more time and energy, while there will be an immediate capital expenditure needed for the business premises, equipment, insurance and staff costs. You will also be required to take out public and liability insurance.  

Setting up as a company will afford you more protection and is fairly inexpensive (although more costly than being a sole trader). However, there may be more complex and time-consuming administrative and tax requirements. You can always start as a sole trader and establish a company once income grows but you will need to factor in the time, cost and energy to change bank accounts, business premises, websites etc at that point.

Please do not hesitate to contact Nusrat Qureishi on email: or tel: 01892 515022.

This blog is not intended as legal advice that can be relied upon and CooperBurnett LLP does not accept any responsibility for the accuracy of its contents.

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March 17, 2023

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