Setting up your own business for the first time can be daunting and sadly even the most fabulous business plans can fail over bad accounting decisions.
One of the most important decisions for somebody entering into the aesthetic treatment business is whether to operate as a Sole Trader or a Limited Company (Ltd).
There are advantages and disadvantages to both. Making the right decision depends on understanding not only what’s right for you now, but also what suits the size and shape of business you anticipate building in the future.
There are an estimated 3.3 million businesses operating as sole traders and another 1.6 million operating as Limited Companies in the UK. So what are the key differences?
- A sole trader is the simplest business structure
- This is essentially a self-employed person who is the sole owner of their business
- Setting up as sole trader is relatively quick and easy – see how to set up as a sole trader (advice given on www.gov.uk)
- Relatively little paperwork – tax is paid via annual self-assessment tax return
- Greater privacy than incorporated businesses
- A sole trader is not viewed as a separate entity by UK law – so if the business gets into debt, the business owner is personally liable and could lose personal assets if things go wrong
- Banks and other investors tend to prefer limited companies where finance is required, which may limit expansion opportunities
- Tax rates for sole traders with above a certain income may be higher than for limited companies (as it is managed via the income tax self-assessment process)
- A limited company has its own legal identity and has shareholders (who own the business) and directors (who have responsibility for managing it)
- In practice, the same person can be shareholder, director and sole employee (useful to understand for a young/small business)
- As a limited company’s liability is limited, personal assets are not at risk if things go wrong – the risk is limited to the company’s assets
- Registered details are listed with Companies House and your company name is unique, so no one else can use it. More about how to set up on Companies House (advice given on www.gov.uk)
- Limited companies can be more tax efficient than sole traders, as Corporation Tax is lower than higher rate income tax. A limited company can also claim certain allowances and costs against profit
- Limited companies have legal responsibilities including filing an annual return (at a small cost) and also compiling/filing annual accounts (which will involve an accountancy cost unless you do it yourself)
- Companies House will list details on directors and also publish accounts
What’s Right For You?
For an aesthetics business, it depends very much what you want to achieve. For somebody starting out with a few hours a week, being a sole trader may be the best option at least initially or even long term (provided you understand the risks as well as the advantages). For somebody committing to a higher number of days or starting with a team of people, then starting as a Limited company may suit better.
At SkinViva Training Academy, we have delegates who have yet to set up a business, those who are already registered as a sole trader and those who have set up as a Limited company.
This is a decision very much down to the individuals involved and while we hope that this general advice is of assistance, it is also advisable to speak to an accountant and maybe even a lawyer if there are any doubts.
We do recommend anybody who is interested in setting up a business in aesthetics to take advantage of our Business Building Tips – Essential Business Knowledge by Dr Tim Pearce.
Botox and Fillers Training Manchester
SkinViva Training Academy offers a comprehensive range of non-surgical skin treatment training courses for medical professionals such as suitably qualified and registered medical professionals who wish to learn and build on their skills in delivering these procedures.
SkinViva Training Academy was established by Dr Tim Pearce MBChB BSc (Hons) MRCGP in 2013 after he set up SkinViva in 2008 – an aesthetic treatment business which now covers the North West of England.
For further information, to discuss which course is right for you, to enquire about availability or to book a training course please call 0161 850 2491, or email firstname.lastname@example.org.