Incorporation ― overview

Copyright © 2026 LexisNexis
Produced by Tolley in association with Rob Durrant-Walker of Crane Dale Tax, part of AMS Group
Owner-Managed Businesses
Guidance

Incorporation ― overview

Copyright © 2026 LexisNexis
Produced by Tolley in association with Rob Durrant-Walker of Crane Dale Tax, part of AMS Group
Owner-Managed Businesses
Guidance
imgtext

Many businesses commence in an unincorporated form as a sole trade or a partnership. Start-ups benefit from the simplicity and low administration provided by an unincorporated structure. Relief for opening years’ losses are also significantly more favourable for sole traders and new partners. Even once a business has become established, operating in an unincorporated form has benefits and may continue to suit the proprietor(s) indefinitely.

However, there is a distinct path for growing businesses whereby incorporation becomes a natural step.

Key reasons to incorporate

The key reasons in favour of incorporation tend to be:

  1. •

    limited liability allowing the mitigation of commercial risks against personal assets

  2. •

    tax mitigation (mainly, to the extent to which profits are retained/reinvested in the company)

  3. •

    flexibility over income in respect of the timing and form of remuneration

  4. •

    a greater ease of attracting external investment ― for instance certain tax reliefs are only available to companies, see the Calculating the tax benefits of incorporation guidance note

  5. •

    prestige value

Limited

Continue reading the full document
To gain access to additional expert tax guidance, workflow tools, generative tax AI, and tax research, register for a free trial of Tolley+™
TAKE A FREE TRIAL NOW
Rob Durrant-Walker
Rob Durrant-Walker linkedinicon twittericon

Tax Director at Crane Dale Tax , Corporate Tax, OMB, Personal Tax

Rob is a cross-tax advisor with a particular focus on property tax planning, and business structure planning for OMB’s. He provides tax advice to other accounting firms, balancing commerciality, ethics, and understanding complexity. His 30+ years of experience start at the Inland Revenue in Hull. After completing his ATT and CTA by 1999 with PKF, he subsequently worked at KPMG and UHY prior to managing the business tax team as a director at Garbutt + Elliott. Rob is now Tax Director at the independent tax consultancy, Crane Dale Tax. He is a regular author for Taxation magazine with many articles and Readers Forum contributions since 2005, and he contributes as a virtual member to the CIOT Property Tax technical committee. Rob works remotely from Vancouver in Canada.

Read moreRead more
Powered by Tolley+™
  • 24 Dec 2025 05:50

Home/ Tolley Tax Guidance/ Owner-Managed Businesses / Starting in business and incorporation

Popular Articles

Employment Tax

Payroll record keeping

Payroll record keepingUnder SI 2003/2682, reg 97, “...an employer must keep, for not less than 3 years after the end of the tax year to which they relate, all PAYE records which are not required to be sent to [HMRC]...”. Reasons for keeping the records include:•being able to calculate tax and

14 Jul 2020 12:52 | Produced by Tolley in association with Ian Holloway Read more Read more
Employment Tax

Non-business expenses

Non-business expensesIntroductionIn order for an expense to be tax deductible it must be incurred because of an employee’s employment. Any non-business related expense is, therefore, not relievable except in some very particular circumstances.This guidance note deals with three separate issues. The

14 Jul 2020 12:16 | Produced by Tolley Read more Read more
Value Added Tax

VAT registration ― change of VAT registration details

VAT registration ― change of VAT registration detailsVAT registered persons must keep their VAT registration details up to date and notify HMRC of any changes. Failure to notify HMRC by the relevant time could result in a penalty. For guidance regarding penalties for failure to notify please see the

14 Jul 2020 13:57 | Produced by Tolley Read more Read more