Tag Archives: advantages and disadvantages

Advantages And Disadvantages of Data Protection Registration

data-protection-registration-infoRunning a new limited company or small business, you will necessarily be dealing with all sort of different personal data and information. The Data Protection Act 1998 puts a number of obligations on business to ensure that this data is not abused or used in a way which might compromise the customer or private individual to their detriment.

One way the law does this is be requiring companies to comply with the 8 data protection principles. A business that will deal with any customer information (also known as a “data controller”) is required by law to register with the Information Commissioner’s Office. This is known as data protection registration (or data protection notification).

But what are the advantages and disadvantages of data protection registration?

Advantages of Data Protection Registration

  • Legal Compliance – registering your business with The ICO is the first step towards ensuring your business is legally compliant. Making sure your company is compliant with all the requirements laid down by the law allows you to avoid unnecessary fines and legal headaches.
  • Avoiding Fines – data protection registration through us includes guidance on the 8 data protection principles and information ensuring your business is compliant. This allows you to avoid the potential fines. As you can see from our other article, breaches of the Act can lead to fines of up to half a million pounds!
  • Better Business Management – because the Data Protection Act requires better management and storage of information, this can generally lead to better business practices. Management of data and storage of information within your company (personal or not) will be better handled with a little knowledge of the law and the requirements placed on your business.
  • Customer Security – registration with The ICO means your business is issued with a data protection registration number. Displaying this on your business website and correspondence instils faith in the minds of your customers. They will know that any data their give you will be handled properly and in good faith – making them more willing to share their personal information, whether it’s credit card details or simply their home phone number.

Disadvantages of Data Protection Registration

  • Strict Maintenance of Data – as a “data controller” you will be expected to abide by the data protection principles and properly maintain data you gather within the remit of the law. Every business is expected to do this, registered or not.
  • The Cost – some might say the cost of data protection registration is prohibitive. However, our low-cost service ensures registration is far less taxing on your wallet. We also provide free guidance on how to abide by The Data Protection Act 1998 and avoid unwanted legal problems.
  • Training – running a business which needs to register as a data controller means you will need to train all your staff to ensure that data is properly handled in accordance with the act. Files need to be secured, paperwork containing personal data should be shredded and much more.
  • Data Protection Procedures – similarly, if you have any home-workers who may take a laptop home with them, you will need to ensure that these are properly secured and encrypted to prevent data falling into the wrong hands. Many businesses have found themselves being fined for such breaches of data protection – even ones which are out of their hands.

The main disadvantage of data protection law is the requirement that your business MUST be registered with The ICO. We can help you get registered and ensure your business is legally compliant from day one. For more information, see our Data Protection Registration service or contact one of our business consultants on 0800 0828 727.

Buy an Existing Business or Start Your Own Company?

Buying an existing CompanyIf you are thinking about starting your own business, you might be presented with a number of potential opportunities and options. Not least of which is the form your business should take. You might even be in a fortunate position of being able to take over someone else’s business. People often look to retire or move on, they might simply be looking to sell their premises or perhaps they’re thinking about selling the business as a whole. The question is would you be better off buying an existing business or starting your own limited company? There are merits to both choices.

Advantages of Taking Over a Trading Business

Taking over an existing business might be an option for you, but what are the advantages and disadvantages? There are a number of potential advantages to buying an existing business rather than starting your own from scratch:

  • Security – The obvious advantage of buying a business that is already trading is the security. Taking over an existing business is far less risky than starting entirely from scratch.
  • Track Record – An established business is likely to have:
    • A good customer base,
    • A healthy credit rating
    • Good accounts,
    • Existing relationships with suppliers; and
    • Some sort of establishment within the community.
  • Employee Experience – An existing and trading business is likely to have experienced employees available to help run your company. They will be able to teach you what you don’t already know about your new undertaking.
  • Existing Cash Flow – Unlike starting your own business, buying an existing business means you can rely on cash flow right from the start. There will be fewer struggles trying to reach break-even point and keeping your business afloat.

Of course you will need to do thorough research to ensure that this is the case. Last thing you want to do is buy a business with a bad reputation which you can’t turn around or purchase a business with serious debt problems.

Disadvantages of Taking Over a Trading Business

The disadvantages of buying a business are equally obvious.

  • Cost – You will probably pay a premium to buy an existing business. The owner will have spent time and money building the business and they won’t want to sell at a loss.
  • No Guarantees - There are no guarantees of success. Just because a business has been trading doesn’t mean it has done so successfully, nor that you will if you take over. It might be based in the wrong location, have a poor client base, bad debt and many other potential problems. You also don’t know about potential legal issues – are there any copyright or trade mark claims against the business? Is there outstanding debt? How is the relationship with suppliers?
  • Learning Curve – Even if you know the industry, you won’t necessarily know the business. Taking over someone else’s business means you will have a lot to learn. Working out how the business operates, what its failing are, potential pitfalls and dangers. All of these things will take time.
  • Fixed Furniture – Buying a trading business means you’re taking on already existing and established practices, people and places. You might be required to keep existing employees on or use the established suppliers, which could work to your detriment. You may not be able to make the business your own in the same way that you could when starting from scratch.
  • Research – You will need to carry out thorough research before purchasing an existing business; otherwise you risk taking on a potential hazardous undertaking.

Alternatives To Buying a Business

There is another alternative to buying an already trading business. You could buy a dormant or vintage company – a company which has already been established and registered with Companies House but never traded. These kinds of company have some of the advantages of existing businesses without the potential disadvantages. For more information see our article on the advantages of vintage company registration.

Starting Your Own Company

Quite often people realise the most preferable option is to start their own business or carry out a company formation to register a new limited company. The advantages of limited company formation speak for themselves. But what are the advantages and disadvantages of starting from scratch?

Advantages of Starting Your Own Company

There are a few advantages to starting your own company rather than buying an existing one:

  • Making it your own – Establishing your own company from scratch allows you to make it your own. You can run it how you want (within the boundaries of the law) without needing to conform to the expectations of an existing customer base, current employees or suppliers.
  • Lower costs – Although it won’t be cheap to start your own business and grow it into a success, it will probably cost less than purchasing one that already exists. Costs will also be traceable and you will be able to manage where you are investing your finances.
  • Clean slate – Starting from scratch there is less risk of unexpected problems, debts and issues hidden by someone selling you there business.
  • Flexibility – You can make the business plan and do the research, then decide on the best possible location for your business, who to hire (and fire), what equipment to buy, which suppliers to use and much more. Starting your own business you can be as flexible as you like.
  • Your brand – Starting your own company allows you to choose your own business brand- Pick a suitable logo, establish a set of principles, work on your own look and feel. All of these things will already be decided for you and well-established when buying an existing business.

Disadvantages of Starting Your Own Company

There are some disadvantages to starting from scratch. They’ve probably already crossed your mind.

  • Risky – Starting a business from scratch is obviously risky. You will need to build you business, establish a client base, balance the books and market your goods and services just right if you hope to survive, never mind turn a profit
  • Hard work – Buying an established business won’t mean there’s less work, but starting from scratch will involve a lot of hard work to turn your business idea into a success.

It’s best to thoroughly weigh up your options before you get stuck into business. Here at The Company Warehouse, we’re determined to make things easier for you, which is why we’re offering FREE Company Formation to everyone looking to start a new company of their own.

Further Reading:

The Advantages Of Voluntary VAT Registration For Small Business

Voluntary-VAT-RegistrationValue Added Tax (VAT) is the sales tax levied against goods and services within the UK. Businesses with a turnover in excess of the VAT Registration Threshold (currently £70,000 P.A. 2010-2011) are required by law to complete a VAT Registration with HM Revenue & Customs. Businesses that fail to do so within 30 days of reaching this threshold are liable for a penalty for failure to notify.
Once a business is VAT registered it can charge VAT on goods and services sold to customers and also reclaim VAT charged on goods and services purchased for the business from other businesses, suppliers etc. VAT registration is therefore an important part of small business.

What Is Voluntary VAT Registration?

Although VAT registration is required by businesses with a taxable turnover above the threshold it is still possible to voluntarily register your business for VAT. And there are several business benefits to doing so.

What Are The Benefits of Voluntary VAT Registration?

There are a few benefits of voluntary VAT registration which make it quite appealing for small businesses.

  1. Avoiding Financial Penalties – No one likes to get an angry letter from the taxman. If you don’t keep a careful eye on your turnover then you might not notice when it creeps over the VAT registration threshold. You can be sure the taxman will though and failure to properly register could result in a nasty fine for your business. The obvious advantage of voluntary VAT registration is you won’t have to worry about passing the threshold or notifying HMRC in time. You can voluntarily register for VAT whenever you want to.
  2. Boosting Your Business Profile – starting out as a small business or new limited company it can be tough to compete against the big boys. Most people are aware of the VAT registration threshold, so voluntarily registering your business for VAT might give the impression that your business is bigger and more successful than it actually is.
  3. Easing Business Dealings – many suppliers and organisations are unwilling to do business with companies and SMEs that aren’t VAT registered. You might find that without the ability to produce a proper VAT invoice many of these people will be unwilling to deal with you. The advantage of voluntary VAT registration is you will be issued with a VAT registration number and can more easily deal with external businesses.
  4. VAT Refunds – another advantage of voluntary VAT registration is the ability to claim VAT on goods and services purchased for your business. If you are selling one sort of VAT Rated product (e.g. zero rated) while buying another (e.g. standard rated) you may actually receive money back from the HMRC in VAT refunds!
  5. Reclaiming The Past – voluntary VAT registration allows you to reclaim VAT from the last 4 years. So if you’ve been in business for a while, but not yet reached the threshold you can still reclaim VAT as long as you have kept the proper VAT records and invoices.
  6. VAT Registration Number – voluntary VAT registration means you’ll get a VAT registration number for your business. You can (and should) display it on your business website, stationery and correspondence. It will instil faith in your business and give your business a professional touch.

How To Register For VAT

You can directly register your business for VAT with HMRC. However because of the problems and issues associated with VAT registration the majority of people find it easier to use an agent. As a company formation agent we have plenty of experience helping people voluntarily register for VAT and getting the registration done correctly the first time. You can have peace of mind knowing that your business will be properly VAT registered and you can start taking advantage of the benefits.
Order VAT Registration online today or contact one of our business consultants on 0800 0828 727 for more support.

Beyond VAT Registration

Once voluntarily registered for VAT you need to abide by the same rules as another other VAT registered business. This means keeping proper records, invoices and submitting a VAT return every quarter. This might be seen as one of the disadvantages of voluntary VAT registration, but in truth it is one small hurdle.
The good news is, our start-up and fixed fee accountancy services include support with filing VAT returns and can be tailored to suit your business. So there is nothing to lose in voluntarily registering your business for VAT.

Related Reading:
VAT Rates
VAT Registration
Online VAT Registration FAQ
Late Filing Penalties

Advantages and Disadvantages of Marketing


“Marketing” is defined by Wikipedia as “the process by which companies create customer interest in goods or services… through which companies build strong customer relationships and creates value for their customers and for themselves.”

Start with a marketing plan – identifying the customer and their needs and wants. Since the essence of business is fulfilling a need it is an important to know which need you are trying to fulfil. Then you need to know how best to reach those customers who have that need.

There are many different marketing mediums and working out which is best for your business is essential, both to keep costs down and to get the most back from your marketing campaign.

There are differing advantages and disadvantages of marketing depending on your chosen medium. But there are also general advantages and disadvantages of marketing across every spectrum.

General Advantages of Marketing

An obvious advantage of marketing is the promotion of your business; getting the recognition and attention of your target audience across a wide ranging or specific market.

Going hand-in-hand with this is the enhanced brand recognition. Over time potential customers and members of the public will begin to associate your logo and your brand with your business.

Every business needs to ‘spend money to make money’. Investing in marketing is no different. The most important advantage of marketing is therefore quite simply improving the businesses profits by boosting sales.

General Disadvantages of Marketing

The first disadvantage of marketing in general is the cost. Adverting and marketing costs money. If you don’t do the proper research then you might end up throwing money away. Wasting marketing efforts by targeting the wrong audience using an inappropriate medium would be a serious and costly mistake. So it is important to do your research beforehand and keep your costs to a minimum.

As well as the financial cost, marketing your business will require investment of time. Researching the appropriate marketing strategy, designing and writing the adverts, getting them published, dealing with any response. It’s important to spend time keeping track of how successful or not your marketing campaign is. A potential disadvantage of marketing here is the risk of time wasted for an unsuccessful campaign.

Research shows that people in general have to see a piece of information between 3 and 30 times before it sinks in. So the obvious disadvantage of marketing here is the fact that your marketing campaign will need to be ongoing and consistent. Increasing costs and time spent on it. This is where drip marketing comes in.

Specific Advantages and Disadvantages of Marketing

For specific types of media there may be other advantages and disadvantages of marketing. Each will obviously vary depending on your business, your market and your chosen marketing techniques.

Print Advertising

Advantages and disadvantages of print marketing are reasonably obvious.


  • Choosing the appropriate magazine or newspaper to advertise and market your business allows you to appeal to a specific audience and demographic. Targeting your adverts at the right audience to maximise its effectiveness.
  • Often an advantage of marketing via print media is the flexibility. The size, placement and type of advert can be adopted and changed according to your needs.
  • Another advantage marketing this way is the repeated display of your advert over time. Multiple appearances in various issues of the paper or magazine will improve chances of your brand sticking with the customers and also the results you will see in terms of sales leads.


  • Cost can be prohibitive. The bigger the advert the more the cost. Magazines and newspapers with a wider audience generally cost more to advertise in and marketing over time in this manner may be too expensive for some businesses.
  • Competition in the marketing space may be another disadvantage. You want your advert to stand out, but unless you can afford to pay for a full page spread you will be competing with the other businesses scrambling for attention.
  • Magazines are often released on a monthly basis, meaning it can take longer for your advert to take hold in a potential customers mind.

Television & Radio Marketing

The advantages and disadvantages of marketing via radio or television will clearly be considerably different to those of print.


  • There are many radio and television stations out there. You can appeal to your local audience by using a local radio or television station. You may also run an advert on a specific station with a genre which would suit your business. The variety of radio and television stations makes it easy to appeal to a specific audience.
  • Your advert may well be repeated throughout the day at specific times, which would allow you to reach the best audience for your marketing.
  • Radio and television marketing allows for regular repetition of your advert, helping satisfy the law of 29.


  • Unless you are targeting a specific audience, you might have to push your advert across a number of radio and television stations to reach everyone you need to.
  • An obvious disadvantage of radio and television marketing is the temporary nature of the advert. Unlike print, potential customers cannot go back to look for your contact information. So you will need to run the advert many times to get the best effect.
  • Listeners/viewers may stop paying attention during advert breaks, which are essentially a disturbance to their enjoyment of the show.

Direct Mail Marketing

Your chosen market might benefit from a direct marketing campaign. Send your adverts, catalogues or product samples straight through your customer’s letterbox. You could target the right audience by using the electoral register to find the right age, sex and demographic or acquire access to marketing mailing lists.


  • Direct mail marketing will allow you to target to your specific customer. Personalising your message to have the best possible impact on them.
  • Unlike other forms of advertising, your marketing will not need to stand out on a page full of other adverts. It will just need to stand out from the pile on the doormat. A brightly coloured, appealing envelope may be all it takes.
  • This type of marketing allows you target a specific area or locality. Especially important if your business is local.


  • Direct mail is often seen as “junk” mail. So if your marketing doesn’t stand out and appeal in just the right way it might find its way straight from the letterbox to the bin.
  • The law of 29 means you will need to do a direct mailing campaign many times before it has an effect.
  • You risk annoying your customers by plaguing them with regular “junk” mail campaigns.


Cold-calling and other telemarketing campaigns have their place in business. They can be effective if done correctly. Like the other types of marketing, they have their own advantages and disadvantages.


  • Personal contact with the customer is more effective than something abstract designed to appeal to a multitude of people. It makes the customer feel more important if you can make them think you are only there to help them with their needs.
  • Results are easy to measure and often a potential customer can be easily led to a sale over the phone. In other words the call to action will be more effective.


  • Cold-calling, like junk mail, can have an unwanted effect as it has negative connotations. Unwanted calls are often dealt with harshly and you might risk damaging your reputation.
  • Technology is out there which is being used to block unwanted telemarketing calls. There is also legislation that needs to be abided by (Privacy and Electronic (EC Directive) Regulations 2003.)
  • Costs may be more expensive than other forms of marketing, depending on your plan.

Marketing Your Business

Weighing up the above advantages and disadvantages of marketing throughout the various mediums will allow you to decide on the best course of action for your business. You might find that using several different techniques will help you get the most out of your marketing campaign.

Whatever you choose to do, you will need to carry out some sort of marketing if you hope to succeed in business and make a healthy profit.

For more information and useful tips on marketing, sign-up for free access to My Company Warehouse where you can download useful business guides and tools to help you get ahead.

Related Reading:

How to carry out a successful Drip Marketing Campaign

Free Secrets to Marketing Success

Marketing Madness – Nokia’s Giant Sign

Using Social Media For Marketing?

Successful Viral Marketing Campaign Crashes Youtube?

Old Spice Viral Marketing Boost Sales By 107%

Unusual Marketing – Superfast Cars for Superfast Broadband

Advantages and Disadvantages of Websites For Business


There are several advantages and disadvantages to having a website for your business or limited company. In the modern age, more and more businesses are getting online. As I mentioned in a previous post, there were around 227,225,642 websites online in September 2010. If you don’t take your business onto the World Wide Web, you could miss out on potential customers, sales and profits. According to data collected by the Office for National Statistics – internet sales were up to £473million (a week) in August 2010 (Retail Sales Statistical Bulletin – August 2010). So having a website designed for your small business or limited company is just one important step towards getting a slice of the internet pie.

So what are the Advantages and Disadvantages of Websites?

Advantages of a Business Website

Reaching a Wider Audience

Website-AudienceThe first and perhaps most obvious advantage of a business website is the potential for reaching a wider audience. The internet is used by literally millions of people, all of them are looking for something and some of them might be looking for you!

Building a website for your business will mean you could potentially reach these otherwise unreachable customers. Your business might be local, but you might have the potential to sell your products or services to a wider market, whether it be people in the next town, the nation as a whole or even the international market. Data shows that internet shopping is still on the rise, so taking your business online will potentially allow you to take advantage of the growth and expand your business. Even if you have no intention of using a business website to sell, you still might want to let customers know about your business. People commonly research businesses online before actually visiting the business location. So having a well designed website will help encourage them to come and visit you or be able to find your business in the first place.

Anyone, Anywhere & Anytime

website-anywhereAn advantage of having a website is your business information and details about your products and services can be accessed by anyone, no matter where they are on the planet or what time of day it is. The internet is online 24 hours a day, 7 days a week. So even if your business isn’t open your website will be!

If you have a contact form or another way for people to be able to contact you – even if it is as simple as your e-mail address on your website, then people can potentially get in contact with you, whether you’re in front of a computer or not.

In the modern age, people are using their mobile phones more and more to browse the internet, find out about businesses and even buy products and services (UK Business Going Mobile – M-Commerce). So even if your website is just a short description of your business it might help customers find your location while they are on the move. This is especially important for restaurants, pubs and other eateries, but is also a relevant consideration for most other businesses.

Easy Access To Business Information

Website-informationWith a website, customers can easily access information about your business. They can see what products or services you sell, your prices, your location and much more. Whatever you decide to tell them, they can find it with a few clicks of a mouse.

Keeping It Fresh

Once a website is designed, you can keep it up-to-date to be relevant to your business and encourage more visitors (and potential sales). More and more people are using a blog to promote their business. In fact, research shows that Businesses That Blog Get More Traffic. So using a blog to keep content fresh and attract attention could mean a big difference to your business.

Publicity & Advertising

You may think of the advantages of a website in terms of advertising and publicity for your business. The costs of having a business website are actually quite low. An affordable website design may cost you around £99, then you need a suitable domain name and good quality webhosting and you’re ready to go. The ongoing costs are minimal, but the potential return on investment could be quite significant. Think of your business website in terms of advertising for your business and you’ll be more likely to see the value.

Links From Others & Viral Marketing

online-marketingWith a website and the current use of social media and marketing, it is quite possible for a good idea, clever product or business service to go “viral”. Word spreads like wildfire across the internet and even the smallest business can get worldwide recognition without any effort on their own part. Viral marketing is a boom in recent years. Our recent article (Old Spice Viral Marketing Boosts Sales By 107%) demonstrated how a simple campaign by Old Spice significantly increased their sales. With a website, you too have the potential to do the same!

If your business is good, people will link to it, people will talk about it and they will share their thoughts. Recognition of your business and your brand will grow.

Securing Your Brand Online

Having a website for your business is not just an advantage; it’s an essential way to protect your business brand online. Stake your business claim on the internet or someone else will! There is a risk that if you don’t have a business website and secure a domain name relevant to your business then someone else will do it for you. The act of Cybersquatting is now less prevalent since the introduction new laws to combat it, but there is still a risk of someone innocently taking your preferred domain name. Others with a gripe against your business might use a website or social media accounts to damage your business reputation. Getting there first will allow you to protect and secure your business brand online.

Disadvantages of a Business Website

There are a few disadvantages of having a website for your business. Generally though, they are outweighed by numerous advantages.


The information on your website might be unreliable if not updated on a regular basis. You need to ensure that changes are made when necessary and have a disclaimer with regards to the reliability of the information contained within.

Crashes & Uptime

website-crashA website that crashes is no good to anyone. This is a serious disadvantage for a business. If your website is constantly crashing or unavailable then people will not be able to find information about your business and you could miss out on potential sales. An unreliable connection could also mean a plummet in a websites search engine ranking. This is the reason why You Need Good Webhosting For Your Business.

Difficultly Reaching The Right People

Because of the nature of the internet and the sheer number of businesses already on the World Wide Web, you may find it difficult to reach the right target audience with your website. Competition within your market may be strong and the battle for the illusive No.1 spot on Google maybe a difficult one, against a wealth of other businesses in your sector. This is not always the case and there are ways around it such as using our Competitor Insight service to learn the competitions secrets and targeting “long-tail” keyword. While Search Engine Essentials can help improve your ranking and put your business on the right footing.


We all hate spam. The internet equivalent of junk mail. This is one of the disadvantages of a website which can cause you some grief. With a contact form or your e-mail address published on your website, you’ll soon find your inbox filling up with spam e-mails unless you use FormGuard or a captcha tool.

Bad Publicity


Having a website risks attracting bad publicity. If a customer is unhappy with your service or products, then they may feel the need to vent their frustrations online and reference your website in their review/comments. This could be potentially damaging, hurting both your reputation and your search engine ranking. Of course, not having a website won’t prevent such things happening but it might allow you to monitor and be aware of it. Providing the best possible customer care and learning from your clients feedback is the best possible course of action to combat this problem.

Taking Advantage of a Business Websites

As you can see, the advantages of a business website far outweigh the disadvantages. The potential for business exposure, advertising and increased sales should be too good for any business to pass up.

Get your business online today with a business website design by The Company Warehouse!

Advantages and Disadvantages of a Sole Trader


When thinking about opening your own business, you might well have given some consideration to becoming a sole trader. Sole trader, also known as a sole proprietor is one of the types of business available for use within the UK. It is also one of the most popular, for a number of reasons, including the ease with which a business can be set up using this form. However, there are pitfalls to be aware of.

A sole proprietorship is a business owned one person, who has full control of the business and how it is run. They also own all the assets of the business and any profit that it makes. In the same vein, they are also responsible for all the debts and liabilities the business accrues. A sole trader is expected to register as self employed with HM Revenue & Customs and will be required to submit an annual self assessment, but generally speaking their accounting requirements are less onerous than those of a limited company.

It is a common belief that setting up as a sole trader is the cheapest option for starting a new business. However, with our FREE company formation offer, there isn’t much in it and as you can see from our article on the advantages of a limited company, in most cases it is preferable to set up a limited company, rather than as a sole trader.

Advantages of a sole trader

Sole traders benefit from the following advantages:

  • Control - Sole traders maintain full control of their business. Running it how they please without the interference of others.
  • Profit retention – Sole traders retain all the profits of their business.
  • Private data – Information about sole traders is kept private, unlike that of limited companies which is necessarily made public after registration with Companies House.
  • Specialist – Often a small business, sole traders can offer a more personal service with local roots and ties. This can be more appealing to potential customers in the local community.
  • Personal – Because there is no need to confer with other decision makers, sole traders can make decisions quickly and act on them swiftly, providing for the needs of their customers.

Disadvantages of a sole trader

Just like any other form of business, being a sole trader can also have its disadvantages.

  • Liability – sole traders are not seen as a separate entity by the law. Therefore, they are subject to unlimited liability. This means if the business gets into debt, the business owner is liable. In the worst case, this may mean a person risks their home, personal savings and any other assets they have both in and outside of the business.
  • Finance – sole traders often find it difficult to raise finance to fund their business. They may struggle with expansion in the future.
  • Reverse economies of scale – sole traders will be unable to take advantage of economies of scale in the same way as limited companies and larger corporations, who can afford to buy in bulk. This might mean that they have to charge higher prices for their products or services in order to cover the costs.
  • Decision making – all decisions must be made by the sole trader. There is no room for help by others. So the success or failure of the business rests on one person.

As you can see, there are several advantages and disadvantages to starting up a business as a sole trader. Whether it is the best choice for you is a personal matter and varies depending on the type of business you are looking to start. Whatever you decide, here at The Company Warehouse we offer a number of services to help new businesses thrive. Why not take a look around our website today and see how we can help you get your business off the ground!

Related Reading:

Limited Liability Disadvantages?


People thinking about starting their own business often have a rough idea of each of the different types of business structure. Their initial business decisions may be based on the advice of friends or family. Following their advice, they often decide that setting up business as a sole trader is the best option. They’ve been told that forming a limited company is too expensive or that the reporting and accounts procedures are too complex and so they turn to the “easier” option.

Within the UK, there are 3 main forms of business which have “limited liability”; these are private limited companies, public limited companies and limited liability partnerships. Each of these forms has its own advantages and disadvantages, but it is worth briefly mentioning a few limited liability disadvantages.

What Are Limited Liability Disadvantages?

Due to the fact that bodies granted limited liability are offered just that (a limit on their financial liability), there are also several rules and regulations which impose restrictions on their functioning. This can be off-putting to some people. The main disadvantages of limited liability include:

  • More stringent reporting – limited liability companies and partnerships have more onerous reporting requirements placed on them. They are required to submit annual returns and accounts to Companies House and keep the registrar up to date with any changes within the business. This is off-putting to those who just want to get on with running their business.
  • Transparency – information about the company is held by Companies House but is also available to the public. Therefore director’s details can be discovered by anyone who cares to know.
  • Accounting requirements – due to the fact that running a limited company is generally more tax efficient (with lower tax rates) than any other form of business, there are stricter rules around accounting.

Limited Liability Disadvantages – The Myths

The truth is, these minor points are often exaggerated and the advantages often outweigh the disadvantages of limited liability. Although reporting and accounts are stricter, there are pay off’s. Corporation tax is charged at a lesser rate (nearly half as much) than the personal tax rate that can be placed on sole traders and the ability to pay via dividends means further tax efficient means of running a business and making a profit without giving all your money to the taxman.

The fact that director’s details are public is of little significance, as in most cases running any business necessarily exposes your personal details to the public. On the other hand, not using a limited liability entity to run your business will expose you to financial risk. This is why over 2 million businesses have set up in the UK as a limited company and thousands more register with Companies House each month. Your finances, your house and your savings will be protected if the business fails or accrues debt it can’t pay.

Many people are under the impression that setting up a limited company is complex and costly. This is yet another myth. With our FREE Company Formation service, we could have your business set up as a limited company within a day!* This can be done with very little hassle and the best thing is your business will be protected. Your company name will be put on the Companies House register and will thus be restricted from use by anyone else. Registering a limited liability company also creates a new legal entity, which will survive beyond the business owners. This is quite appealing to business people who have put (or will put) years of blood, sweat and tears into their business endeavours.

Contact our business consultants today for guidance on how to run the most tax efficient business by carrying out a company formation! 0800 0828 727.

Free Company Formation

*depending on Companies House backlogs and submission times. See site for details.

Umbrella Company Vs Own Limited Company

umbrella company

What is an Umbrella Company?

An umbrella company is quite simply a large limited company which operates as a kind of agency on behalf of contractors from various industries. In most situations, a contractor will be a self employed person who will do short or long terms periods of work for various companies, rather than remaining in the employ of a specific company. There are however situations where organisations are opposed to taking on such self-employed contractors and require invoices to be issued via a limited company. This is where umbrella companies come in. Umbrella companies offer self employed contractors the ability to carry out work for their chosen organisation and the umbrella company will simply invoice that organisation on behalf of the contractor. In the past this was seen as a simple solution to the problem. However there are problems with using an umbrella company.

The Disadvantages of Umbrella Companies

Although using an umbrella company might seem like a hassle-free method for a contractor to carry out work for an organisation there are a number of downsides. Firstly and probably most importantly is the financial matters. Most umbrella companies act in an agency style, imposing charges or service fees on the contractor. They may take a percentage of the money earned by the contractor through his work with the organisation. Therefore meaning that the contractor will end up taking home less money than he or she would otherwise have earnt.

The umbrella company also dictates how the invoices are dealt with. Generally speaking this means that the umbrella company will use a PAYE system to pay the contractor, treating them as a temporary employee of the company. So as well as being subject to the commission charges levied by the umbrella company, the contractor will also be subject to Tax and NI contributions.

What Is The Alternative?

The alternative to using an umbrella company is to set up a limited company. Many people will be put off by this option, thinking there is a lot of hassle involved and some umbrella companies would have you believe that the long terms costs make it prohibitive. However, there are a number advantages of a limited company which make this option far more appealing.

Advantages of a Limited Company

Most notably, using a limited company means that a contractor can take advantage of the tax advantages offered to such an entity, he or she will retain full control of how they invoice the organisation(s) they choose to work for and how they go about paying themselves. Due to the nature of the tax laws surrounding running a limited company, it is possible to do this in a far more tax efficient way. Paying via dividends allows a director to counter the higher rates of tax levied on personal income tax.

There are several other advantages which allow the contractor with a limited company to be tax efficient and thus maximise their take home money from contracting work. Clearly this includes the ability to reclaim tax on company expenses among other things.

The cost of setting up and running a limited company is not as much as people think (or umbrella companies would have you believe) and if, as a contractor, you intend to work for a number of clients over a variety of periods of time then this means that the cost will be spread over that time. If you consider that the commission charges will mean that a contractor may only take home 60% of their earnings then setting up a limited company is far more appealing.

Cost Efficient Company Formation

If you are a contractor or thinking of undertaking contracting work, then why not take advantage of our low cost company formation service. For a limited time you can set up a limited company for free and with legal and tax advice available from our business consultants and our recommended accountants – Pinnacle Accountancy, you can be sure that your own limited company will be far more tax and money efficient than using an umbrella company.

Free Company Formation With Bank Account

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Advantages and Disadvantages of Partnership


A partnership is commonly formed where two or more people wish to come to together to form a business. Perhaps they have a common business idea that they wish to put to the test or have realised that their skills and talents compliment each others in such a way that they might make a good business team. Forming a partnership seems like the most logical option and, in some cases, it is. Running a small business with a reasonably low turnover, a partnership is quite often a good choice of legal structure for a new business. The way a partnership is set up and run as well as the way it is governed and taxed often make it the most appealing form of business. However, there are circumstances where this isn’t the case.

Being a partnership, the business owners necessarily share the profits, the liabilities and the decision making. This is one of the advantages of partnership, especially where the partners have different skills and can work well together. However, it can obviously present some problems. Over the years, many partnerships have turned sour. Family and friends go into business together and end up falling out on a personal or business level and it all ends badly. This is one of the major disadvantages of partnerships over other business models, but it’s important to be able to balance the advantages and disadvantages.

Advantages of Partnership

  • Capital – Due to the nature of the business, the partners will fund the business with start up capital. This means that the more partners there are, the more money they can put into the business, which will allow better flexibility and more potential for growth. It also means more potential profit, which will be equally shared between the partners.
  • Flexibility – A partnership is generally easier to form, manage and run. They are less strictly regulated than companies, in terms of the laws governing the formation and because the partners have the only say in the way the business is run (without interference by shareholders) they are far more flexible in terms of management, as long as all the partners can agree.
  • Shared Responsibility – Partners can share the responsibility of the running of the business. This will allow them to make the most of their abilities. Rather than splitting the management and taking an equal share of each business task, they might well split the work according to their skills. So if one partner is good with figures, they might deal with the book keeping and accounts, while the other partner might have a flare for sales and therefore be the main sales person for the business.
  • Decision Making – Partners share the decision making and can help each other out when they need to. More partners means more brains that can be picked for business ideas and for the solving of problems that the business encounters.

Disadvantages of Partnership

  • Disagreements – One of the most obvious disadvantages of partnership is the danger of disagreements between the partners. Obviously people are likely to have different ideas on how the business should be run, who should be doing what and what the best interests of the business are. This can lead to disagreements and disputes which might not only harm the business, but also the relationship of those involved. This is why it is always advisable to draft a deed of partnership during the formation period to ensure that everyone is aware of what procedures will be in place in case of disagreement and what will happen if the partnership is dissolved.
  • Agreement – Because the partnership is jointly run, it is necessary that all the partners agree with things that are being done. This means that in some circumstances there are less freedoms with regards to the management of the business. Especially compared to sole traders. However, there is still more flexibility than with limited companies where the directors must bow to the will of the members (shareholders).
  • Liability – Ordinary Partnerships are subject to unlimited liability, which means that each of the partners shares the liability and financial risks of the business. Which can be off putting for some people. This can be countered by the formation of a limited liability partnership, which benefits from the advantages of limited liability granted to limited companies, while still taking advantage of the flexibility of the partnership model.
  • Taxation – One of the major disadvantages of partnership, taxation laws mean that partners must pay tax in the same way as sole traders, each submitting a Self Assessment tax return each year. They are also required to register as self employed with HM Revenue & Customs. The current laws mean that if the partnership (and the partners) bring in more than a certain level, then they are subject to greater levels of personal taxation than they would be in a limited company. This means that in most cases setting up a limited company would be more beneficial as the taxation laws are more favourable (see our article on the Advantages and Disadvantages of a Limited Company).
  • Profit Sharing – Partners share the profits equally. This can lead to inconsistency where one or more partners aren’t putting a fair share of effort into the running or management of the business, but still reaping the rewards.

As you can see, there are several advantages and disadvantages of partnership in terms of a business undertaking. The two main disadvantages are the levels of taxation and the liability. The latter being negated by the ability to form a Limited Liability Partnership (a type of body only available since 2000). The Company Warehouse has a Limited Liability Partnership formation service that we have been running for a number of years, helping people set up their new partnerships. Our specialist team have a good working knowledge of the law and the current advantages of partnership over the other legal forms of business. So they can advise you on the best choice for your new enterprise.

If you decide that setting up a partnership isn’t for you, don’t forget we are currently running a limited time offer of FREE Limited Company Formation, there are many benefits of limited companies so it is worth giving some thought before you decide. Feel free to contact a member of our team for free on 0800 0828 727 for further guidance.

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Advantages and Disadvantages of a Limited Company

What is a Limited Company?

A Limited Liability Company, quite simply is a company whose liability is limited. That’s the short version. The longer version is that a limited company is a type of company which when set-up allows an entrepreneur to keep their own assets and finances separate from the business itself. This means that people who have invested in the business (the shareholders) are only responsible for any company debts up-to the amount that they have invested and no more. It is therefore a good way for a business to get investment  without risk to a personal wealth. Essentially a Limited Company is seen as an entity in its own right, which can be subject to legal action. As a separate body, a limited company can even be the director of another company.

The Company Types

company-advantagesPublic Limited Companies – also known as PLCs, Public Limited Companies are businesses which have been established with at least 2 shareholders with at least £50,000 worth of shares issued.

Private Limited Companies – are similar to public companies but can be run with just one member and cannot trade shares to the public to raise capital.

Public Limited Companies – usually only created for very specific reasons, these sorts of companies are far less common.


In order to set-up a Limited Company, there are a few criteria that first have to be satisfied. These are laid out by The Companies Act 2006.

Firstly, the Company must be registered with Companies House. TheCompanyWarehouse.co.uk is here to help entrepreneurs who are planning to set-up a limited company, we know what is required by the government and can offer a number of services to help new start-ups register their business and succeed in the marketplace. We have a number of company formation packages, allowing you to start-up your business, from as little as FREE (subject to T&C’s).

The second requirement is that the company must have at least one Director (or two for a PLC) who is at least 16 years of age (since October 2008). Previously under the Companies Act 1985 a Director could be any age up-to 70 years old. The new Act has removed this as it was being abused by companies, have directors under 16 years of age. This was changed by The Companies Act 2006, at the same time removing the maximum age limit. All company directors under 16 are now void.

The Management

The director(s) run the business, the shareholders fund it and reap the rewards. The Company will be taxed on its trading profits and will have to charge VAT on services/products it offers where relevant. Our VAT registration service makes this process simple, be sure to read our guide on VAT and the different rates that might apply to your business, including how to reclaim it. Our accountancy service will help you manage the business accounts and keep the business in proper shape.

Advantages of a Limited Company

Limited LiabilityThe obvious advantage of a Limited Liability Company is the financial security that comes with business. As already mentioned, the Company’s shareholders will only be liable for any debt the company accrues according to the levels of their own investment and no more. This can provide a comfortable feeling of security for investors in the Company.

Separate EntityDue to its very nature, a limited company is deemed to be a separate legal entity from its owners. This has several advantages, including the fact that the company will exist beyond the life of its members. If they retire or die, the company will continue to exist and operate. This ensures security for employees and other members and also is an advantage which other legal forms of business are not subject to.

calculate-company-advantagesTaxation and Tax AdvantagesLimited Companies are only taxed on their profits (usually at a rate of 21%) and as such are not subject to the higher (personal) tax rates placed on sole traders or partnerships which can reach 40%. There are ways to use the limited company form to benefit the members/directors and their interests. If you are forming and running a limited company, you are recommended to pay yourself at minimum wage levels. This allows you to take advantage of the fact that the personal allowance level is £6,475. So you are required to earn over this amount before you will pay income tax on it. When you consider that income tax rates are:

  • 20 % on earnings up to £37,400 and;
  • 40% on earnings over £37,400

Then you can see the advantage of paying yourself in dividends instead of in the form of a pay packet (in the normal sense), especially when you consider that tax on dividends is only 10% and there are no NI (national insurance) charges on them! There are complexities involved where you wish to pay a pension for your retirement, but if you consider that dividends can be paid at any time during the company’s financial year (as many times as you like) it actually makes this method of paying yourself (and other members) more preferable. It also gives you further incentive to work hard to make a profit with the company, as dividends payments are made up of distribution of the company’s profit.

company-carNot Using a Company CarMany people take pride in their company car. However, as the owner of a limited company, you are actually better off not purchasing and running a company car, but instead using your own personal car for business purposes. In this way you can charge the mileage accrued on business travel to the company which allows you to benefit from tax free fuel and the costs are actually tax deductible to the company, so you benefit in two ways.

Using Your HouseStarting out as a small company, you may not be able to afford to lease or buy premises to run your business from. The good news is, you can run the business from your house and claim back for the cost of doing so. If you use 1 room in your home for business purposes then you have to calculate the cost of that room by working out the costs of the house in general (water, electricity, heating, council tax and rent or mortgage interest (not the mortgage payments themselves)) then dividing that number by all the rooms in the house to give you the amount you can claim back.

Ownership and ControlIn the case of Private Limited Companies, the Directors are also usually the main shareholders of the Company. Thus both the ownership and control of the business remain in their hands. Decisions can be made quickly and easily, with little fuss, allowing for a more successful business management platform.

Company Name Part of registering a Limited Company, includes the registration of a Company name. This name will help identify the business in the marketplace, separating it from other Companies and protecting it. If you are thinking of setting up a Limited Company, use our FREE Company Name Search tool to ensure your chosen business name is available, then register it for FREE! A Company name is protected from the registration date, yet a Limited Company is not legally required to begin trading on that date, so registration can be a good way to secure a name for future use.

Employee ShareholdersIn some instances employees can purchase shares (or be granted shares via a company share scheme) and become shareholders of the company. This is good as it rewards the employee’s for their work, providing extra motivation beyond a mere salary. Not only will they have a vested interest in seeing the business succeed, but they will have a say in how it is run.

See more Benefits of a Limited Company on our website.

Disadvantages of a Limited Company

Cost Some people will have you believe that a Limited Company is expensive to set-up. Not so! Our Company Formation packages start from as little as FREE! And include many related services and products that would cost you highly elsewhere.

Complex AccountsThere are more complex and restrictive rules governing the accounts and bookkeeping of Limited Companies than sole traders (for example). The Company is expected to produce years accounts incorporating a double entry format, balance sheets and other notes. With the (generally) larger nature of a Limited Companies business this can be a time consuming and costly undertaking. The Company Warehouses accountancy service is custom made to ease the burden on Limited Companies. Our low-cost, competitively priced service will take hold of the accounting reigns and allow you to remain free to concentrate on the running of the business.

Restricted Capital RaisingFor Private Limited Companies, there is a restriction on the raising of capital via sale of shares. As mentioned, PLCs can gain further funding by the sale of shares, but this ability is lost to Private Limited Companies whose shares are restricted.

Dilution of Powers Due to the nature of Public Limited Companies, sometimes disputes will arise between Directors and Shareholders as their ideas of what is best for the company vary. Sale of shares to increase company funds will further dilute the management, as more and more people have a say in how the company is run. There is also a risk (since Companies can buy shares) that a takeover might occur this way.

As you can easily see, the advantages of a Limited Company, far outweigh the disadvantages. So if you are looking to set-up a company, why not let www.TheCompanyWarehouse.co.uk help you? Our expert team have been helping entrepreneurs from all over the Country form successful businesses for years. Our Company Formation Services are the lowest priced around and as you can see from the table below we provide a wealth of extras included to help you on your way to success.

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