Sole Trade or Limited Company For Amazon FBA?

One of the first decisions that you’ll need to make as the owner of a business in the UK, is whether you want to set yourself up as a sole trader, or as a limited company.

Both of these options have their own advantages and disadvantages, and in order for you to be able to properly start running your business, you’ll need to have decided which one you want to use. So in this article, I’m going to walk you through:

  • the differences between a sole trade and a limited company
  • the quickest & cheapest way to get a limited company set up
  • my view on which option is the most suitable (for the majority of people).


A sole trader is essentially a self-employed person who is the sole owner of their business. It’s the simplest business structure out there, which is probably why it’s the most popular- you can set one up by visiting the Government’s sole trader website and filling out the appropriate forms – easy!

What Is A Limited Company?

A limited company is where a business with its own legal identity is created, which is separate from its owners (known as shareholders) and the senior people that run it (known as directors). These two aren’t mutually exclusive, so if you own a limited company and you also run it, then you’d be a shareholder and a director.

An example of a business that operates as a sole trader could be a decorator who works for himself or with help of a few others, and an example of a limited company could be a new business that specialises in home improvements.

Pros & Cons of a Sole Trader

Creating and then running a business as a sole trader has its pros and cons, with the main advantages being that setting up as a sole trader is free and easy to set up with relatively little paperwork required, they have low accounting  costs, they can result in the owners paying less tax overall in a small number of circumstances, and they offer greater privacy than a limited company whose details are publicly available.

The main disadvantage associated with being a sole trader is the fact that as the sole owner of a business that is not a separate legal entity, you have unlimited liability, which means that any debts incurred by the business are essentially going to be YOUR debts, which means if anything goes horribly wrong, then you’d risk losing your personal assets in order to repay any lenders that are owned.

An additional downside of being a sole trader is that once you start to earn a certain amount of income, the overall level of tax that you pay to the government will be higher than a limited company, so it’s not as tax efficient.

Pros & Cons of a Limited Company

Unlike sole traders, creating and then running your business as a limited company means that you’ll have limited liability if anything goes wrong – so in the event that things do turn south, your personal assets such as your house or car, aren’t going to be exposed, –you only risk losing any money that you’ve paid into the company.

An additional benefit of  creating a limited company is that they’re typically more tax efficient than sole traders – i.e. you’re going to be paying less tax to her majesty the queen in the long run. Limited companies are also pretty efficient and flexible if you want to start your business with a friends or family members, whereas if you’re a sole trader this isn’t possible without having to go down the partnership route.

In terms of the downsides of creating a limited company, well, firstly it’s important to note that lots of information on a limited company is publicly available – so that means if somebody wanted to, they could look up the details of your company’s directors and its earnings. It’s unlikely that anybody would want to do this unless they were interested in buying your business, but if you don’t want your address to be on public record, you should use a serviced address, which is essentially where you pay a small fee to have an anonymous PO Box address associated with your company.

Whilst it’s nice to think of yourself as a Director if you own a  limited company, that title does bring with it some legal responsibilities, which includes the need to sign and submit your company’s financial accounts every year. Because of tasks like that, you could argue that the limited company route is more of an administrative burden than the sole trader one, but with that said the majority of people just get their accountants to do all of these boring tasks for them. If you don’t have an accountant yet and you don’t know where to find one, then the easiest way to find one is by checking local options out, or even easier, going with an online firm such as Osome.

Which Is Better – Sole Trader or Limited Company?

As we’ve discussed, both sole traders & limited companies have their own advantages and disadvantages, but generally speaking, for most people the advantages of a limited company outweigh those of a sole trader, with the main factor being the tax benefits.

Once your business starts to earn profits of more than £10,000 or so a year (which hopefully it will in the not so distant future), that’s where the tax efficiencies of a limited company really come into play, and for that reason, every business that I’ve set up has always been created as a limited company.

If you’re still unsure as to which solution is right for you after reading this article, let me know in the comments or get in touch with Osome.

I hope you enjoyed this article & now understand the differences between a sole trader and a limited company.

If you want to learn about how you can create your own business with ‘Amazon FBA’, then check out my free training where I run through my exact 5 step strategy that I’ve repeatedly followed to continue launching successful products.

Or, if you’re ready to begin your journey and want to start with the best chances of success, check out the Smashers Academy.

P.s. if you want to learn more about my business creation journey (highs and lows), check out my Amazon FBA review here.

Previous ArticleNext Article


helium 10 review