The most common question when starting out: which company type is better? Criteria based on profit, liability, cost and growth plans.
The choice of company type determines everything from your tax bill to your personal liability. We recommend considering these five criteria.
1. Expected annual profit
Sole proprietorships pay progressive income tax: the higher the profit, the higher the rate. Limited companies pay a flat corporate tax. Above a certain profit level, a limited company usually becomes more advantageous.
2. Liability
A sole proprietor is liable for business debts with all personal assets. In a limited company, partners’ liability is generally limited to their committed capital (with exceptions for public debts).
3. Set-up and running costs
A sole proprietorship is faster and cheaper to set up, and accounting fees are usually lower. A limited company involves trade registry, notary and capital costs.
4. Partnership and investment plans
If you plan to work with partners or raise investment, a limited or joint-stock structure is more suitable.
5. Corporate image
Some large firms and public tenders may expect suppliers to be incorporated.
Conclusion
The right answer depends on your business. We compare both scenarios using your expected revenue and costs and recommend the best structure.
Ask our advisor for an assessment tailored to your situation.
