The Simple meaning lies between the names itself. The limited company simply means limited liability while sole trader means a single person owing one type of business. In PNG, we don’t understand the meaning of a sole trader or a limited company but we only look at the price while trying to register it with IPA. A Business Name or a Sole Trader is K200 while to register a company will cost you K600.
SOLE TRADER
In PNG context, we say registering of business name. A sole trader business is very easy and simple. Even to register with IPA its convenient and effective. Only one or two or maybe three people can own a simple business. While it is very simple and convenient, there are some disadvantages associated with owning a sole trader business.
Disadvantages
1. Sole trading have unlimited liability, which means there is no legal difference between themselves and their business – so if your trade store got a K10,000.00 debt with BSP and you haven’t paid it, BSP will start digging through your personal account. If you are an employee who have regular fortnight, BSP will deduct their money directly from your personal account or maybe sometime touch the savings you have with Nambawan Supa.
2. Tax rate on sole trader is bit expensive. In your tax account with IRC, a business will be issued a consolidated account statement using is personal name. you could realize this when you apply for TIN from IRC.
3. Using a sole trader, you will only be confined to one type of business. Meaning if you have a bus service, you won’t use the same name to embark on a trade store business.
LIMITED COMPANY
A Limited company is a type of business structure that has got limited liabilities. This means the company is a legal entity of its own and is separate from its owners, shareholders or managers. To start a company its quit expensive has it cost K600 to register it but K500 every year to maintain it by filling the annual return. However, let’s try and look at some of the advantages of owning a company.
Advantages
1. The owner and company are separate from each other. If the company owes a debt to someone or the banks, the owner is not liable for it unless some kind of a guarantee is signed by the owner of the company. If the company got K50 000 in debt default, but the owner has K100 000. In his/her personal account, the Bank will not dare to touch it.
2. Once you register your entity as a company, no one else could use the company name. Your company will be protected by the company laws
3. You can use the company to engage in multiple businesses. Both the trade store and a bus service could come under one company business.
4. You can sell your company if you wish to to the general public. Or sometimes ask people to buy shares from your company. Shares are bought when the company wishes to expand its operation and needs capital. However, if the company is PTY LTD, then you won’t be able to sell or include shareholders as it’s a private company.
5. The company pays corporate tax which is sometimes lower than PIT. If you make lose you could always bring it forward to the next year to see if you are making lose or profit. All you need to do I file the annual tax return.
There are many reasons behind individuals registering a business name or a company. Choose the best which fits your company or business and formally register it.
Good LUCK
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