Choosing your business structure
When you open a business account, you will need to tell us whether you trade as a sole trader or a limited company (LTD). These are the two most common business structures in the UK, and they affect how your business is legally set up and managed. Selecting the correct account type during your application ensures you have access to the right tax tools and features to run your business smoothly. 🥳
Sole traders
A sole trader is the simplest way to run a business. If you are a sole trader, you are self-employed and you personally own the business.
Legal status: There is no legal separation between you and your business, you are the business.
Profits and debts: You keep all profits after tax, but you are also personally responsible for any losses or debts the business has.
Taxes: For your business account, you will usually file a Self Assessment tax return with HMRC each year.
Example: Freelancers, hairdressers, or delivery drivers working for themselves often register as sole traders.
Limited companies
A limited company is a separate legal entity from the people who own or run it. Most small companies have one or two directors.
Legal status: You are legally separate from the business. This means your personal money and the company’s money are not the same.
Taxes: The company has its own finances and pays Corporation Tax on its profits.
Registration: You must register your company with Companies House and file annual accounts.
Example: If you have registered a name like “Taylor Design Ltd”, you are running a limited company and might pay yourself a salary or dividends.
Need help deciding?
We want you to pick the path that’s best for you! While we cannot give legal advice on which option to choose for your business account, these GOV.UK resources are a great place to start:
If you are still unsure, we recommend speaking with a qualified accountant or business adviser who can look at your personal circumstances before you start your application.