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 liability means that the members of a company (ie the

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

Personal Tax

Foreign tax relief

Foreign tax reliefIncome and gains may be taxable in more than one country. The UK has three ways of ensuring that the individual does not bear a double burden:1)treaty tax relief may reduce or eliminate the double tax2)if there is no treaty, the individual can claim ‘unilateral’ relief by deducting

14 Jul 2020 11:44 | Produced by Tolley Read more Read more
tag-icon Tax Returns
Personal Tax

Payment of tax due under self assessment

Payment of tax due under self assessmentNormal due dateIndividuals are usually required to pay any outstanding income tax, Class 2 and Class 4 national insurance, and capital gains tax due for the tax year by 31 January following the end of the tax year (ie 31 January 2025 for the 2023/24 tax year).

14 Jul 2020 12:52 | Produced by Tolley Read more Read more
Corporation Tax

Entity classification

Entity classificationImplications of entity classificationIf a subsidiary is established, it is important to determine how it will be treated for UK tax purposes as this will determine the basis on which it is taxed. A subsidiary may either be transparent (like a partnership, where the individual

14 Jul 2020 11:37 | Produced by Tolley Read more Read more