Tweak Your Biz » Finance » Limited Company Vs Sole Trader: Mind-map graphic

Limited Company Vs Sole Trader: Mind-map graphic



This is a question that we get asked over and over. I have laid out the various pros and cons in mind-map format and hope you can see it clearly. My preference is certainly for a limited company but many go for the simplicity of the sole trader and associated cheaper compliance costs. Certainly if you are a very small trader with little travel, it probably makes sense. You can always incorporate at a later stage. However for the vast majority of businesses I think a company is the appropriate structure for the following main reasons:

  • Much better treatment of taxes, pensions and allowable expenses
  • Limited liability safeguards the owner’s private assets
  • Much more flexible structure for business combinations, taking in partners, sourcing finance etc.

In the mind-map below I get into detail on all the different areas. Anybody out there with a contrary opinion or any feedback at all I’m all ears.



The Author:

Accountant with 17 years business experience. Principal of Bradán Consulting based in Galway. The firm provides accounting, business planning and governance services. Member of Fáilte Ireland Business Mentors panel. Chairman of SpunOut.ie. Board member at COPE Galway. http://www.bradanconsulting.ie

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  • http://www.salestipaday.com/ Chris Hamilton

    Barney,

    Great post. I totally agree with numerous aspects of the post, but the “We stopped after a few weeks, we weren’t making any headway” is a classic. I just left a company that was so bent on having the immediate results. Because the whole aspect of engaging in social media is foreign to a lot of the higher ups at the company that I was working at, they just assumed it was the “If you build it they will come”, except they forgot that Rome wasn’t built in a day.

    Patients is key and especially as you have eluded to, having a plan.

    Chris Hamilton

  • http://blog.myprojecttracker.com Barney Austen

    Hi Chris. Thanks a million for the comment. The “you have it so they will come” thing is a definite problem and becomes very frustrating for those of us who know better! Cheers. Barney

  • http://www.btbtraining.com/blog Niall Devitt

    Hi Barney, Congrats! You made it to number 1 on the Bizsugar weekly top ten :-)

  • http://www.cgonlinemarketing.com/ Christina Giliberti

    Hi Barney,

    It’s always been the case that marketers have had to tentatively convince management etc of the next big thing to intereact with customers. That’s especially difficult when funds are low. But social media in my eyes is pure gold. Not only are you tapping into an incredible number of current and potentials, but you can interact with them directly and constantly. That’s before we mention the ‘no-cost’ tag.
    It’s barmey to ignore, but if we’re honest its not the newness (if I can even say that now!) its the fear factor.
    Will people engage with me? Will I know what to say? etc
    It’s also the time issue. Blogging, chatting … its all time, and social media soesn’t nec bring in an instant convertion.
    I sell it as the side-benefit or slow buy. Keep conversation ticking, keep the incentives rolling and wait ….
    You’re building something that is the most valuable – loyalty.

  • Anonymous

    Yep, Social Media is no good for businesses who don’t have a well planned strategy for it. Here are a couple of things one should keep in mind:

    # Whom an I targeting?
    #Are my customers available on this platform?
    #Are my prospects available on this platform?
    #Can I get references to new leads through Social Media?
    # Can my groups connect me to new networks?

    If you can successfully answer these, you’ve got yourself a new avenue. I don’t proclaim that Social media is the new vantage point to “watch” your business grow. It’s simply a new platform. Just like the field of a soccer match to propose your girlfriend, or the entrance to that grand cricket match, which hosts the banner of a new upcoming Car model. If you understand where your target audiences are going, and what your customers are talking about, you could definitely do more focused advertising, and undoubtedly more focused selling.

    Our sales team uses the social media (of course within our own app) to “hear” the voices, our customers use the same platform everyday to “track” their HOT accounts. Trust me, none of it is going to waste. One customer recently confessed to me “there’s so much good information here, wonder when I’m going to start making calls”. I kid you not.

    I talk about some “good” strategies that my colleagues have adopted in closing larger deals in my blog post: http://blog.insideview.com/2010/04/27/connecting-the-dots-how-sales-2-0-can-help-you-connect-with-prospects/

  • Anonymous

    Well, I don’t really agree to your ideas on how to save time while still being connected. One of your comments also mentioned that you have to be a lazy B** to be not able to keep efficient track of what you’re doing in your productive hours. If you spend too much time on “Social Media”, you’re probably not fit for that job anyway.

    If you know where to draw a line, and if you have your objectives clear, you can do both (work and SM research) productively. Most of the masters in the field would tell you that no matter how you integrate Twitter, facebook, Blogs, etc in to oe place, once you get in to the loop of following the threads, you’ll never know whe your day ends.

  • http://twitter.com/fredchannel Fred

    Welcome to Bloggertone Aonghus! First cool post. Amazing how a mind-map can help understand things much better. I remember when we started in business this was one of the top 10 questions that you heard in start up meetings. Useful post.

  • http://www.btbtraining.com/blog Niall Devitt

    Hi Aonghus, welcome to Bloggertone! this is a great idea! Wish I had something similar when I was starting out.

  • http://www.ivanwalsh.com Ivan Walsh

    Hi Aonghus,

    Something else to consider is that being a Director of a Ltd Company seems more impressive than ‘just’ being a sole trader.

    The services you provide may be the exact same (quality-wise anyway) but the perception from others will be different.

    For different reasons, when you say you’re a Director of a Ltd Company people pay more attention…

    Great information graphic, by the way.

    Ivan

  • Anonymous

    Aonghus,

    What a great way to illustrate what is involved with either setting up one’s business structure as a sole trader or a limited company! There are so many considerations and you’ve showed them so clearly that one could sit down and follow a decision tree to determine which structure suits one’s SME best. I’ve bookmarked it for future reference and to pass on to others.

  • Jonathan Duggan

    Great Stuff Gus. Must echo comments below and add that a LC is searchable & vouchable as an entity, usually in any jurisdiction, through the equivalent of the Companies Registration Office, including its Directors and Owners. It definitely adds a layer of transparancy often alcking in a registered trading name of/or a Sole Trader. Mind mapping certainly simplifies the message – great format. I’ve just cut & pasted this and billed a client for it!! Thanks.

  • Derek

    Aonghus, really impressive. But there are some gaps in the tax analysis and there are opportunities that I can identify for you – email me if you’d like me to join up some of the dots for you.

  • Aonghus Sammin

    Derek, Jonathan, Elli, Ivan, Niall and Fred
    Many thanks for your feedback and for the kind words. Also please forgive the few typos that I spotted on the post since. Definitely there will be other factors to consider that I haven’t listed but hoping to create a more or less comprehensive picture.
    The mind mapping software I use is called Freemind and available free to download. I use it all the time and find it excellent.
    Regards
    Aonghus

  • Aonghus Sammin

    Hi Derek – can you post some of the gaps here, so it can complement the posting. Don’t have your email
    Regards
    Aonghus

  • Justyd2004

    Great layout Gus. All those questions that do pop into your head when your considering LC v’s Sole Trader. KHL, Justine

  • http://www.seefincoaching.com/blog Elaine Rogers

    Customers always wonders to themselves – WIIFM (what’s in it for me?)nVender should ALWAYS ask themselves WIIFT (what’s in it for them?)nnBy knowing what a client/customer wants to buy, we know the right product/service to sell.nA sales person in 2011 needs to be much more than a seller of things, they need to be a SME (subject matter expert), a confidante, a coach, an advisor. It should get to the stage where the client involves the sales person in their decision making, referring back before any decisions are made.nnA match made in Heaven one may wonder, but I believe it works.nnGreat post, nothing like a Monday morning discussion about customers :)n

  • Torihawthorne

    Thats SO true Elaine, we are so many things to our customers. A good Team/Sales Leader is all those things to their team too, if a sales person feels support in all those areas from above, they will in turn have the confidence to be what the customer needs…nnPeople think to be a great sales person you have to be able to talk.. You do, but you have to be a better listenernWe could chat about this forever ;)nnThanks for your comment Elaine

  • http://www.tweakyourbiz.com Niall Devitt

    I know this mightn’t be as relevant in B2C but I now don’t attempt to sell unless the prospect has a good grasp of what they need, if they are in denial or are unprepared to invest in the right way, I send them elsewhere, there are plenty of other companies that will take their money. I found that I was spending too much time with companies who were not yet ready to buy what they needed. In my opinion, the key in B2B sales at the mo is to ensure that you spend your time talking to prospects that are in a position to buy.