Self-employed or limited company: which suits you when starting out
The differences that really matter, without jargon.
In a nutshell
- Being self-employed is simpler and cheaper to set up. A limited company separates your personal assets from the business's.
- When starting out, most people choose to be self-employed and think about a company once they earn quite a lot.
- The decision depends on how much you'll earn, the risk and whether you'll have partners.
It's one of the first questions when starting out. There's no single answer, but there are a few differences that help you decide.
Self-employed
- It's set up in a day and with almost no costs.
- You pay income tax on what you earn: the more you earn, the higher the percentage.
- You're liable for the business's debts with your personal assets.
- The bookkeeping is simpler.
Limited company
- It has to be set up before a notary and registered, with a minimum capital and some costs.
- The company pays corporation tax, at a fixed rate.
- In general, you're only liable for what you've put into the company.
- It needs full accounts and annual financial statements.
- The director usually also pays contributions as self-employed.
So, what should I do?
If you're starting alone, with little investment and you don't know how much you'll invoice, the usual thing is to start as self-employed. If you'll have partners, a lot of risk or you earn quite a lot, a company may pay off. It's worth doing the numbers with an adviser.
Frequently asked questions
Can I start as self-employed and set up the company later?
Yes, it's very common. When you set it up, you deregister as a self-employed individual or change how you pay contributions.