Starting a business in the construction industry is an exciting step, but it also comes with important decisions—especially when it comes to how you’ll register your business.
Should you keep it simple as a sole trader, or would a limited company structure better suit your plans? Each option has its own advantages and challenges, and the right choice depends on your goals and future plans. Here’s a breakdown to help you decide which option is best for you.
Sole Trader: The Simple Start
Becoming a sole trader is a straightforward way to get started, making it a popular choice for many new construction businesses.
Advantages
- Easy Setup: Registering as a sole trader is quick, requires minimal paperwork, and is often the simplest way to begin.
- Lower Costs: With fewer administrative tasks, you save on costs since you’re not required to file company accounts.
- Full Control: You keep all the profits after taxes and have complete control over business decisions.
Considerations
- Unlimited Liability: As a sole trader, you’re personally responsible for any business debts or legal issues, meaning your personal assets are at risk. Make sure you’re up to date with your insurance cover. Key cover should include public liability and professional indemnity insurance.
- Less Credibility: Some larger clients may prefer to work with limited companies, especially on more significant projects.
- Higher Taxes for Growth: If your profits grow, you might end up paying more tax as a sole trader than you would as a limited company.
For those starting small or who plan to take on local work, a sole trader setup can be an ideal low-cost, low-admin choice.
Limited Company: A Professional Approach
Registering as a limited company is often seen as the more formal route, offering added benefits for businesses with growth ambitions.
Advantages
- Limited Liability: Your personal assets are protected, as only the company’s assets are liable for any business debts.
- Tax Efficiency: Limited companies generally pay less tax, as you can take income through a mix of salary and dividends, which is often more tax-efficient.
- Increased Credibility: Limited companies are sometimes viewed as more trustworthy, especially for larger projects or contracts.
- Business Growth Potential: It can be easier to secure loans or funding as a limited company, which can help you scale your business.
Considerations
- More Admin: Running a limited company involves filing annual accounts, corporation tax returns, and complying with various company regulations.
- Higher Setup Costs: Incorporating and managing a company, along with hiring an accountant, can involve higher costs.
A limited company structure can be beneficial if you plan to scale quickly, take on larger contracts, or need added protection for your personal assets.
Which Option is Best for a New Entrant?
For a new entrant in construction, choosing between sole trader and limited company comes down to your specific situation:
- Sole Trader might be the best choice if:
- You’re starting small or handling local/domestic work.
- You prefer a low-cost, low-admin setup.
- You’re unsure about long-term business plans and want flexibility.
- Limited Company may be more suitable if:
- You have ambitions to scale and take on larger contracts.
- You want to protect your personal assets.
- You expect your profits to exceed £50,000 per year, where tax savings can start to make a significant impact.
How TruTrade Can Help
No matter which structure you choose, TruTrade is here to support you. Our project management and estimating services help streamline your operations, so you can spend less time on admin and more time growing your business. If you’re unsure which structure is right for you, speaking with an accountant or business advisor can provide tailored advice for your unique situation.
Starting your own construction business is a big decision, and setting up the right business structure from the start can set you up for future success. Whatever your path, TruTrade’s tools and resources are here to help you achieve your goals. Additionally, TruTrade’s trusted partners can connect you with professional services, ensuring you have the right guidance when making critical decisions.
Thinking about going sole trader or limited? Want some more advice on this subject? Let us know in the comments, or reach out to learn how TruTrade can help simplify your journey to business success!
