The situation
A sole trader running a design studio had grown her profits steadily. Friends kept telling her to become a limited company to save tax, but she did not want to add admin and cost if it would not genuinely pay.
The problem
Incorporating changes tax, liability and admin, and the saving only outweighs the extra cost above a certain profit level. Getting the timing wrong, or the transfer of the business handled badly, can cost rather than save.
What we did
- Modelled both structures. We compared her tax as a sole trader against a company with a salary and dividend mix, on her real numbers.
- Confirmed the timing. The numbers showed a worthwhile saving, so we recommended incorporating.
- Handled the switch. We formed the company, transferred the business with the right reliefs, and set up pay, VAT and records.
What changed
She now trades through a limited company with a genuine, quantified tax saving over remaining a sole trader, plus the protection of limited liability. The transfer was handled cleanly, and her pay is set up efficiently from day one.
What this shows
Incorporating is not automatically right, but at the correct profit level it saves real money. The decision is best made on your actual figures, not a rule of thumb.
Wondering if you should go limited?
We model both structures on your numbers and show you the real difference in pounds. If it pays, we handle the whole switch cleanly.