Why I created a limited company instead of remaining a sole trader

Hello, I am Michael Ashcroft. I am a human who owns and is employed by a business called Michael Ashcroft Ltd, because I have no imagination.

I created the business in March 2021. Until then I had been doing freelance work for about ten years (around full time employment) as a ‘sole trader’, also known as a sole proprietor in other parts of the world. Any income I made from these ‘side hustles’, as people who aren’t me call them, just counted towards my personal income, so all I had to do was declare this and pay a little extra tax.

There was nothing stopping me from remaining a sole trader, so why create a company? There are lots of benefits around tax, separation of my assets and liabilities and those of business, and nudging others to take me more seriously as a seller and buyer of things.

These were all extra perks though. I created the company mainly because I wanted the business to have a separate identity from me.

The moment I created the business I felt this rush of what I can only call opportunity. Suddenly there was potential, an agency that could act in the world independently of me, pursue strategies independently of me, and collaborate with other people in various ways, again independently of me.

Of course, right now I’m the one doing everything, because I’m the only shareholder, I’m the only director and I’m the only employee. I have strategy meetings with myself (they’re bangin’, we have keto doughnuts). I’m okay with this, and of course I’ll tell you why.

In his excellent book The E-Myth Revisited, Michael Gerber explains the difference between working in your business and working on your business. To work in your business means to do the work of operating the business: making things, selling things, marketing things, talking to customers, all that stuff. To work on your business means, among other things, to define what the work actually is, to create structures and systems so that the work gets done efficiently, and to recruit people into the roles you’ve defined, as needed.

Even if I never hire anyone, I want a business that encourages me to work on it and not just in it. This is the perspective shift that happened when I created the limited company: suddenly working on and working in clarified themselves and became separate from what was before a foggy mix of both working on and working in at the same time.

The idea that, as a result of me working on it, the business might one day grow to become something larger than me gives me a helpful injection of ambition. It’s not me who makes things and sells them to people, it’s the business that creates products and sells them to customers. I find that a powerful and helpful difference.

At this point I can hear the concerns of a little voice in my head. Doesn’t this make everything more impersonal? Aren’t I at risk of creating a job for myself? Is this a hustle trap in disguise? Am I still caught in Total Work?

Honestly, there’s certainly a risk of all that, but there always is. Growth and scale for their own sake are not what I want, but if I get the incentives, motivations and targets wrong at this stage then that’s what my business might push me towards.

I’m comforted by the other constraints I am bringing to my business, though. First and foremost, at least for now, I am optimising for things that aren’t lots of money and prestige.

I want a lifestyle that gives me space for adventure and to focus on my health, relationships and learning. I suspect this will also make me better able to be of benefit to people, not only through the work I do, but in the way I am able to be in the world.

Right now the idea of growing enough to hire people so that I can grow more doesn’t seem like fun. Perhaps one day it will, but for now I’m happy to be a solopreneur who just happens to have a thoughtfully-designed company.