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The question new founders ask us most is: “Should I register as a sole trader or a limited company?” There is no single right answer; it depends on expected profit, partnership plans and appetite for risk. To make the decision easier, we compare six criteria side by side.
1. Taxation
A sole trader’s profit is taxed under progressive income tax rates, so the rate rises as profit grows. A limited company’s profit is subject to flat-rate corporate tax, with additional withholding when profit is distributed to shareholders. At lower profits a sole trader is often better; above a certain level a limited company usually becomes more efficient.
2. Liability
A sole trader has no legal separation from the business, so you are liable for debts with personal assets. In a limited company liability is generally limited to capital, although shareholders and managers may remain liable for public receivables such as taxes.
3. Set-up and running costs
A sole trader is set up faster, with fewer documents and lower cost. A limited company requires articles of association, trade registry filing and minimum capital, and monthly accounting fees are usually higher.
4. Partners and transfers
If you are starting with others or plan to bring in partners, a limited company offers more flexibility. Ownership can change through share transfers, which is impossible for a sole trader.
5. Corporate image
Some large clients, public tenders and foreign companies prefer suppliers with a company structure. Your target clients may influence the choice.
6. Exit and closure
A sole trader can be closed within days. Liquidating a limited company can take months because of public notices and statutory waiting periods.
In short
- Starting alone with uncertain income: usually a sole trader.
- Partnership, high expected profit or corporate clients: usually a limited company.
- Undecided: you can start as a sole trader and incorporate as profits grow.
At Ankara Muhasebem we compare the approximate tax burden of both options using your own numbers during the consultation. Rates and capital amounts can change, so always check current values before deciding.
