Compare the Difference Between Similar Terms

Difference Between

Home / Business / Management / Strategic Management / Organization Structure / Difference Between Sole Trader and Limited Company

Difference Between Sole Trader and Limited Company

April 17, 2011 Posted by Olivia

Sole Trader vs Limited Company

Sole trader and limited company are two major forms of business. When starting up, it is very important to decide on the structure of the business as it has many implications for both the owner of the business as well as his dealings with other businesses. Both sole trader and limited company are popular in recent times and entail different functions and responsibilities. This article will highlight the features of both to enable an entrepreneur to decide on the structure that is best suited for his requirements.

Sole trader

This is the simplest structure when starting a business. You just need to register as a sole trader and submit an annual income tax return to continue. The books can be maintained easily and there is no need for an audit. Main features of a sole trader are as follows.

• Owner of the business is responsible for all affairs of the company.

• If there is bankruptcy, owner needs to pay creditors from his assets and cannot run away from them.

• Sole trader has to pay for any legal compensation that might arise because of running the operations of the business.

• The buck starts and stops with the sole trader. He takes all the profit after taxes, and he also bears responsibility for any losses that business may suffer from.

• Sole trader needs to maintain financial records to separate expenses on business and leisure.

• Such a business comes to an abrupt end with the demise of the sole trader or when the business goes bankrupt.

Limited company

Limited company is a separate entity and has a distinct structure with roles and responsibilities. Here are some of the features of a limited company.

There is no sole owner and there are employees who can be directors, staff, or even receptionist to help and assist in the operations of the company.

Registration of a company is required by law and also the minimum number of people to start a company is also specified.

Capital for the business is raised by issuing shares to either employees or to general public. When public is involved, it becomes a public limited company.

Shareholders are not liable for any amount over and above the money they paid for their shares.

Directors, in consultation with shareholders run the day to day operations of the company.

The company continues to exist even if any shareholder or director passes away.

It is clear then that there are many differences between a sole trader and a limited company. However law makes no distinction between the two.

Related posts:

Difference between Limited Company and Private Limited Company Difference Between Subsidiary and Division Difference Between Joint Venture and Strategic Alliance Difference Between TM and Registered Trademark Difference Between Corporation and Cooperatives

Filed Under: Organization Structure Tagged With: entrepreneur, features of limited company, features of sole trader, Limited Company, major forms of business, responsibilities of shareholders, responsibilities of sole trader, Sole trader, structure of business

About the Author: Olivia

Olivia is a Graduate in Electronic Engineering with HR, Training & Development background and has over 15 years of field experience.

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Request Article

Featured Posts

Difference Between Coronavirus and Cold Symptoms

Difference Between Coronavirus and Cold Symptoms

Difference Between Coronavirus and SARS

Difference Between Coronavirus and SARS

Difference Between Coronavirus and Influenza

Difference Between Coronavirus and Influenza

Difference Between Coronavirus and Covid 19

Difference Between Coronavirus and Covid 19

You May Like

Difference Between FII and QFI

Difference Between Measles and Roseola

Difference Between Measles and Roseola

Difference Between Golden Globes and Oscars

Difference Between Sony Xperia Tablet Z and Google Nexus 10

What is the Difference Between Ethylene Dichloride and Ethylidene Chloride

What is the Difference Between Ethylene Dichloride and Ethylidene Chloride

Latest Posts

  • What is the Difference Between Osteoporosis and Scoliosis
  • What is the Difference Between Saree and Half Saree
  • What is the Difference Between Hypernatremia and Hyponatremia
  • What is the Difference Between Diabetes Mellitus and Diabetic Ketoacidosis
  • What is the Difference Between Sciatica and Spinal Stenosis
  • What is the Difference Between Metatarsalgia and Morton’s Neuroma
  • Home
  • Vacancies
  • About
  • Request Article
  • Contact Us

Copyright © 2010-2018 Difference Between. All rights reserved. Terms of Use and Privacy Policy: Legal.