Should I be a Sole Trade or Limited Company when starting my video games business?

Choosing the right structure for your new business will have a significant impact on your success. There are actually 5 main structures to consider including Sole trader, Partnership, Limited liability Partnership, Limited Company or Community Interest Company. Here we focus on a comparison between a Sole Trader business and a Limited Company.

Sole Trader

1. Set up: Low cost.
2. Tax & National Insurance: Profits liable to income tax and NI as they arise.
3. Personal allowance: Allowance can be utilised against business profits.
4. Filing obligations: Annual self-assessment tax return.
5. Tax planning opportunities: Limited.
6. Drawing funds: No restrictions on drawing from the business for personal use.
7. Limited liability: No protection.
8. Video Games Tax Relief and R&D Tax Relief: Not available.
9. Ability to attract finance: Reduced.

Limited Company

1. Set up: Low to moderate depending on complexity.
2. Tax & National Insurance: Profits liable to corporation tax.
3. Personal allowance: Allowance cannot be utilised against company profits.
4. Filing obligations: Company accounts, company tax return & self-assessment tax return.
5. Tax planning opportunities: Significant.
6. Drawing funds: Director / shareholders may draw funds through salary & / or dividends.
7. Limited liability: Shareholders have greater protection over personal assets.
8. Video Games Tax Relief and R&D Tax Relief: Available.
9. Ability to attract finance: Improved.

If you would like to discuss the structure of your gaming studio and which one would be most suited to you, please get in touch with Luke Thomas.

Gaming Blog Series

1- What do I need to start my own game studio?

2- What are the 5 key things I should do before starting my indie dev business?

Author: Luke Thomas, Director, Plus Accounting

Contact Luke

Any views or opinions represented in this blog are personal, belong solely to the blog owner and do not represent those of Plus Accounting. All content provided on this blog is for informational purposes only. The owner of this blog makes no representations as to the accuracy or completeness of any information on this site or found by following any link on this site.

Date Published: 15 June 2021