Setting up as a VA: Sole Trader or Company?

Starting your VA journey and becoming a Virtual Assistant is an exciting career path that offers flexibility and independence. One of the first decisions you'll need to make is whether to register as a sole trader or set up your own company, and that's what this blog post is here to help with, guiding you through the initial steps to help you make an informed choice.

Understanding the Basics

What is a Sole Trader?

As a sole trader, you are self-employed, and there's no legal distinction between you and your business. Set up is easy and fast, but there is no separation between your personal & business finances and this may seem less "official" to some clients.

...VS a Company:

A limited company is a separate legal entity from you as an individual. This structure offers more protection as there is separation between personal and business assets, but it comes with more administrative responsibilities and legal costs.

What do both options involve?

Sole Trader:

Register with HMRC as self-employed (free)

File a Self-Assessment tax return each year

Pay income tax and Class 2 & 4 National Insurance

Keep records of your income and expenses

Invoice you as a business

Pro tip: Get public liability and Professional Indemnity Insurance

Limited Company:

Register a company with Companies House* (currently £50)

File annual accounts and corporation tax returns

Become a director and shareholder

Open and maintain a business bank account

Register for corporation tax

Pro tip: appoint an accountant

(you may need to register for VAT in the long run if your companies income exceeds £90k)

*I found deciding on a company name the most difficult thing about the setup - my mother told me 'Steph Sorts It' wasn't professional enough, and I often regret that I listened to her 😅

Pros & Cons?

Sole Trader:

Pros

Easiest and fastest setup

Fewer admin & filing responsibilities

Great for starting small or testing the waters

Cons

No separations between person & business finances

Less tax-efficient at higher income levels

May seem less 'official' to clients

Limited Company:

Pros

Separation between personal & business assets

Often more tax-efficient via salary + dividends

Adds credibility & professionalism when approaching clients

Easier to scale if you're looking to hire or outsource in the future

Cons

More admin and accounting costs

Must comply with company law

Less flexibility in taking out money freely

Which option is right for you?

Choosing between registering as a sole trader or registering a company when setting up as a VA, is a significant decision that depends on your personal circumstances and business goals. If you're just starting out, building confidence and earning under £50k, registering as a Sole Trader will do what you need (for little to no cost). If you're looking to warn more than £50k per year and want to grow the business, a company many be more beneficial. I personally started from day one with a limited company - but that's because my mother is an accountant & advised me on what to do given she was going to be able to do my accounting free of charge. I still do a self-assessment tax return each year as this covers the income from dividends.

The above is just my view and opinion, from my experience. Remember to take the time to research and consult with a professional if needed. The most important step is to start your journey as a VA with confidence and clarity. No matter which route you take, this could still be your office view in months to come...