Starting a business in the UK can feel like navigating a maze of legal terms and administrative steps. If you’re starting out as a sole trader, one of the most common questions that arises is: Do sole traders have a company number? This article will clarify what a company number is, whether sole traders need one and what you need to know if you’re running your business as a sole trader in the UK.
What Is a Company Number?
A company number, formally known as a Company Registration Number (CRN), is a unique identifier assigned to limited companies and limited liability partnerships (LLPs) in the UK. This number is issued by Companies House, the government body responsible for company registrations, when a company is officially incorporated. The CRN is used to track a company’s legal status. It is required for filing taxes, annual returns and other legal obligations.
Do Sole Traders Need a Company Number?
In short: No, sole traders do not have or need a company number.
As a sole trader, your business is not a separate legal entity from you. You are personally responsible for the business’s liabilities and profits, unlike a limited company where the business is treated as a separate legal entity. Because sole traders aren’t incorporated in the same way as limited companies, they are not required to register with Companies House. Therefore they, do not receive a company number.
How Do Sole Traders Register Their Business?
While sole traders don’t need a company number, they still need to register with HM Revenue & Customs (HMRC) to pay taxes. If you’re starting out as a sole trader, you must register for Self Assessment and file annual tax returns.
Here’s a quick step-by-step guide to registering as a sole trader:
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- Inform HMRC: You need to tell HMRC that you are self-employed by registering online. This will allow you to file your annual tax return.
- Get a Unique Taxpayer Reference (UTR): When you register, HMRC will issue you a Unique Taxpayer Reference (UTR), which is your equivalent of a company number as a sole trader. The UTR is used for tax purposes and must be included on your Self Assessment tax returns.
- Keep Financial Records: You must keep detailed records of your income and expenses for tax purposes.
What If I Want a Company Number?
If you would prefer to have a company number and the legal separation that comes with limited liability, you can register your business as a limited company. A limited company offers certain advantages, such as protecting your personal assets from business liabilities, but it also comes with increased administrative responsibilities.
To incorporate your business as a limited company, you’ll need to:
- Register with Companies House.
- Choose a company name that complies with Companies House rules.
- Submit a memorandum and articles of association.
- Pay a registration fee.
Once registered, you’ll receive a CRN and be subject to ongoing filing requirements. This includes annual accounts, confirmation statements and corporate tax returns.
Sole Trader vs. Limited Company: Key Differences
| Aspect | Sole Trader | Limited Company |
|---|---|---|
| Legal status | You and the business are the same entity. | Separate legal entity from the owners. |
| Company number | No company number. | Receives a CRN from Companies House. |
| Personal liability | You are personally liable for business debts. | Liability is limited to the company’s assets. |
| Taxation | Pay tax on business profits through Self Assessment. | The company pays corporation tax; directors pay personal tax on salary and dividends. |
| Administration | Simple to set up and minimal paperwork. | More complex, with additional legal requirements. |
Conclusion
If you’re a sole trader in the UK, you do not need or receive a company number. Your focus should be on registering with HMRC and keeping good financial records. However, if you want the benefits of limited liability and a company number, you can opt to form a limited company.
Understanding the differences between sole trader and limited company status is essential as you start or grow your business. Whether you’re content with the simplicity of being a sole trader or prefer the structure of a limited company, the right choice depends on your business goals and how much administrative responsibility you’re willing to take on.
Starting your journey as a sole trader? Remember that while there’s no company number needed, registering with HMRC and staying compliant with tax regulations is essential to keeping your business running smoothly.
This guide should give you clarity as you take your next steps as a sole trader or small business owner in the UK. If you’re uncertain about which structure to choose, it’s often worth consulting with an accountant or business advisor to ensure you’re set up in the best way for your circumstances.