Self employed or a Limited company, which should I register my startup under?


4

I am a web developer and I am currently self-employed work with several companies on different projects. As I am also thinking of building start-up. And I don't own a team, I work alone by far so my question here is that if I create a startup should I register it under my self-employment title or go and register a new limited company and make that startup a part of it. As I said I don't have a team rite now but might be in future I own a group of people that work with me, and as per my knowledge a self-employed person can also hire staff too.

So being short what are the benefits of working under a limited company, and should I go limited company for my startup and how much paper/legal work is required plus and last and most important, is there any extra cost is involved?

Getting Started Legal

asked Sep 13 '11 at 01:46
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Safran Ali
272 points

2 Answers


5

A limited company will make things much easier later on, as you take on partners, suppliers, investors, customers, etc. All these stakeholders generally prefer dealing with a "real" business, not a self-employed person.

Also, the word "limited" is a big clue about why you need a limited company. If you happen to get sued, your liability is limited to the amount of share capital you invest, whereas for self-employed your potential liability is unlimited.

Of course, insurance can mitigate these risks.

Depending on your jurisdiction, the courts can sometimes override this rule, but this is generally only in cases of fraud, etc.

answered Sep 13 '11 at 02:01
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Steve Jones
3,239 points
  • I defiantly can attest to the LLC route because the pass through taxation helps a lot to keep bookkeeping costs lower, and you also look more professional, and have the corporate shield protections -- and typically the fees are around $200 per state to file, plus publication notice fees (around $600 in NY I know) -- but those are one time and definitely are worth the expense. – Theonlylos 9 years ago

5

This question looks very similar to this other one: Sole Proprietorship vs LLC So, here is my answer, copied here
LLCs will give you a legal 'shield' that a sole-proprietorship will not but all other costs will generally be lower with a sole proprietorship.

I can't say about grants but bank loans should be the same both ways in that for a startup the bank will want you to personally guarantee the loan anyway.

Writing off startup costs should be the same both ways, at least they have been for me.

In general, for this kind of business, I would recommend starting as a sole-proprietorship and if things really start to get big then incorporate later. I did this for a consulting company and after three years I converted the firm into an LLC and that was quite easy to do. More paperwork under and LLC and certainly not worth it when you're just starting out.

answered Sep 13 '11 at 02:02
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John
1,194 points

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