Chapter 2.1: Sole trader or limited company?
What you'll learn: the two common ways to run an Amazon business in the UK, how they differ in practice, and how to choose. There's no single right answer. Plenty of successful sellers use each.
This page explains the general picture so you can make an informed choice. It isn't tax or legal advice. For decisions that depend on your own circumstances, check GOV.UK or speak to an accountant.
Do you need a company to sell on Amazon?
No. Amazon lets you register as an individual or as a business. Many people start as a sole trader, which means you're self-employed and the business is you. Others set up a limited company from day one. Both can open an Amazon Professional seller account and use ArbiSource.
The two options side by side
| Sole trader | Limited company (Ltd) | |
|---|---|---|
| What it is | You trade as yourself; the business and you are legally the same | A separate legal entity that you own (as shareholder) and run (as director) |
| Setting up | Register as self-employed with HMRC | Incorporate with Companies House, then register for Corporation Tax |
| Paperwork | Lighter: a yearly Self Assessment tax return | More: the company files its own accounts and Corporation Tax return each year and confirms its details with Companies House, and you pay personal tax on what you take out |
| Tax | Income Tax and National Insurance on your profit | Corporation Tax on company profit; you then pay personal tax on salary or dividends you take |
| Liability | You're personally responsible for business debts | Your personal liability is generally limited to what you put into the company |
| Privacy | Your details stay with HMRC | Directors' names and some details appear on the public Companies House register |
| Bank account | A separate business account is strongly recommended, even if not always required | A business bank account in the company's name is needed |
| Amazon sign-up | Register using your own details | Register with the company's details, including its company registration number |
How to choose
A sole trader often suits you if:
- you're testing the water and want to start quickly with minimal admin
- your profits are modest to begin with
- you'd like to keep your details off public registers
A limited company often suits you if:
- you expect the business to grow, and want to separate it from your personal finances from the start
- you want limited liability
- your accountant has shown you it's more tax-efficient at the profit level you expect
Lots of sellers start as sole traders and move to a limited company later, once profits grow. An accountant can tell you when the switch starts to make sense for you.
If you choose a limited company
- You'll set it up through Companies House (Set up a limited company on GOV.UK).
- Directors and people with significant control (usually you, as the owner) must verify their identity with Companies House before the company can be registered. It's free through GOV.UK One Login, by app, online or at a participating Post Office. An accountant registered as an authorised agent can also do it for you. Allow time for this before you plan to register with Amazon. Verifying your identity for Companies House (GOV.UK)
- Open a business bank account in the company's name. Amazon will pay your sales into it.
- Register with Amazon using the company's exact registered name and address. The details on your seller account should match your company documents.
If you choose to be a sole trader
- Register as a sole trader with HMRC. You'll then complete a Self Assessment return each year; an accountant can handle this for you.
- Open a separate bank account for the business. It makes bookkeeping far easier.
- Register with Amazon using your own name and home or business address.
No. Amazon requires individual sellers to be at least 18 years old (Amazon Payments UK user agreement, section 1.1).
Checklist
- I've decided whether to start as a sole trader or a limited company
- I've registered with HMRC, or incorporated with Companies House and completed identity verification
- I have a separate bank account for the business