Sole trader: Simple and Personal

A sole trader is the simplest way to run a business.

You’re self-employed, and you and the business are legally the same thing.

You keep all the profits, but you also take on all the risk, if the business owes money, you owe money.

You’ll pay Income Tax and National Insurance through Self-Assessment each year.

You’ll pay Income Tax and National Insurance (at the updated self-employed rates) through your annual Self-Assessment

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For the 2025 - 2026 tax year, most self-employed people only pay Class 4 National Insurance, which is charged at 6% on profits between £12,570 and £50,270, and 2% on anything above that. Class 2 NI has now been abolished for most sole traders, so you no longer have to pay a weekly flat rate just to keep your record up to date. If your profits are very low, you can still choose to pay Class 2 voluntarily (at £3.50 a week) to protect your State Pension, but for most people the system is now much simpler, everything happens automatically through your Self Assessment.

You don’t need to register with Companies House or file company accounts.

In short:

Sole traders suit freelancers, consultants, and side hustlers who want to start fast with minimal admin.

Pros:

• Easy and cheap to set up
  
  
• You’re in full control
  
  
• Less paperwork

Cons:

• You’re personally liable for business debts
  
  
• Less credibility with larger clients or investors
  
  
• Harder to separate personal and business finances

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Private limited company (Ltd): A Separate Legal Entity

A private limited company is legally separate from you.

That means the company’s finances are its own. Your personal assets are protected if things go wrong.

This structure is popular with founders who want to grow something bigger than themselves, whether that’s a small agency, an online brand, or a tech startup.

You’ll need to register your company with Companies House and follow certain reporting rules, but in return you get credibility, flexibility, and limited liability.

You’ll pay Corporation Tax on company profits. Then, if you take money out as salary or dividends, you’ll pay personal tax separately.

Pros:

• Protects your personal assets
  
  
• Looks more professional to clients and partners
  
  
• Easier to bring in co-founders or investors later
  
  
• Potentially more tax-efficient
  
  

Cons:

• More admin than being a sole trader
  
  
• Some details (like director names) are public
  
  
• Must file annual accounts and confirmation statements

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How Foundrs Fits In

Right now, Foundrs helps you set up a private limited company — quickly, correctly, and in plain English.

No government portals. No confusing forms.

Here’s what we’re building:

• Guided incorporation: conversational AI that helps you register your company step-by-step, without jargon.
  
  
• Smart business setup: we help you choose the right SIC code and avoid common mistakes that could delay your registration.
  
  
• No more paperwork: you don’t need to touch Companies House or fill in an IN01 form, we handle it all behind the scenes.
  
  
• Built-in ID checks: we verify you and your shareholders automatically, in line with UK ACSP regulations.
  
  
• Ready to grow: your Foundrs dashboard is created automatically, helping you stay organised and compliant from day one.
  
  

You stay in control, we just make the process simpler.

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Public limited company (PLC): Big Business Territory

A public limited company (PLC) is the next level up.

It’s designed for large organisations that want to sell shares to the public, sometimes on the stock market.

PLCs face strict rules around governance, finance, and transparency.

They must have at least two directors, two shareholders, and £50,000 of share capital (with at least a quarter paid upfront).

This setup isn’t for most early-stage founders.

The regulatory burden is heavy, and the costs of compliance are high.

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Pros:

• Access to significant investment
  
  
• Public credibility
  
  
• Limited liability
  
  

Cons:

• Expensive to run
  
  
• Complex reporting requirements
  
  
• Pressure from shareholders and investors

Tax: What changes Between Them

Here’s the simple version:

You don’t need to know the fine print on day one, just that limited companies handle tax as a business, while sole traders handle it as individuals.

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Switching structures

Businesses evolve.

You might start as a sole trader, then switch to a limited company once things grow.

That’s completely normal, and it’s something Foundrs can support when you’re ready to incorporate.

Which is right for you?

If you’re just getting started, a private limited company is often the sweet spot, it gives you protection, credibility, and room to grow, without the heavy admin that comes with being public.

• Go as a sole trader if you're exploring freelancing or self employment
• Aiming to build a start up or small business - then setting up a private limited company
• The Public limited company route is specialist and really only appropriate if you're looking at major investment early or are planning to list on an exchange

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In summary

Choosing your business structure sets the foundation for everything else.

You don’t need to get it perfect, you just need to start with the one that matches your goals today.

Foundrs is being built to make that first step simple.

We’ll guide you through registering your private limited company, choosing the right setup, and keeping everything organised from day one.

No jargon. No portals. No panic.

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