How do accounting practices handle client onboarding for limited companies vs sole traders?
From November 2025, directors must verify with Companies House. Learn entity-specific onboarding steps, risk assessment requirements, and common AML audit failures.
·4 min read
The most significant change to UK company onboarding in recent years came through the Economic Crime and Corporate Transparency Act 2023. From November 2025, all company directors and people with significant control must verify their identity directly with Companies House. This applies to limited companies and LLPs but not to sole traders, meaning the two most common client types you’ll onboard already require materially different processes before you’ve issued a fee quote.
Beyond the Companies House changes, the Money Laundering Regulations 2017 impose a risk-based due diligence obligation on every accounting practice. The nature and depth of those checks depends on the entity type. 1 in 5 UK accounting firms currently fail their AML compliance audit, and inadequate onboarding documentation is consistently one of the leading causes. A local sole trader operating from a single address presents a very different risk profile to a UK-registered limited company with overseas directors and complex financing. Your onboarding process needs to reflect those differences.
What does onboarding a sole trader involve?
Sole trader onboarding is typically the most straightforward of the entity types, but that doesn’t mean it’s frictionless.
Identity verification: You need to verify the identity of the individual: a government-issued photo ID (passport or UK driving licence) and proof of address (utility bill or bank statement). Document the verification and retain it for at least five years after the business relationship ends.
Engagement letter: The engagement letter should cover the specific services agreed, fee structures, your data handling obligations under GDPR, and your AML compliance statement. BrightPropose by Bright generates professional and branded engagement letters with built-in e-signature functionality, removing the friction of posting documents and chasing written signatures.
Companies House: If the client trades under a business name, document this clearly in your records.
Tax reference: Collect the client’s UTR for self-assessment at the point of onboarding. Missing this creates a gap that someone will have to close before filing.
Risk assessment: Complete a written risk assessment and record the CDD level applied.
What extra steps apply when onboarding a limited company?
Limited company onboarding involves significantly more documentation and a broader set of stakeholders.
Companies House verification: Confirm that directors and PSCs have completed identity verification with Companies House, as required from November 2025. Inform Direct by Bright integrates directly with Companies House and gives practices a streamlined way to manage company secretarial obligations, director changes, confirmation statements, and PSC records for their entire client portfolio.
Company-level CDD: Verify the company itself using the Companies House registration number, registered address, and filed accounts.
Director and PSC identity verification: Verify each director and PSC using government-issued ID and proof of address.
Risk assessment: The company’s sector, structure, ownership, and geographic footprint all feed into your risk assessment. An owner-managed limited company operating in the UK with transparent finances is typically low risk. A company with nominee directors, overseas shareholders, or activity in high-risk sectors will require Enhanced Due Diligence and potentially ongoing monitoring.
Engagement letter: The engagement letter should be entity-specific, covering the defined scope of services, fee structures, GDPR obligations, and your AML compliance statement.
What about onboarding LLPs and partnerships?
LLPs are registered at Companies House and subject to similar identity verification requirements to limited companies. Verify each designated member and any beneficial owner with more than 25% interest. The engagement letter structure reflects the LLP agreement rather than a shareholder structure, but the AML obligations are effectively the same.
Partnerships (non-LLP) are not registered at Companies House, which means there’s no centralised registry to cross-reference against. Verify each partner individually and document the partnership structure. Risk-assess as you would for any unregistered entity, considering the number of partners, the nature of the business, and whether the structure raises any beneficial ownership questions.
What are the most common onboarding failures that lead to AML audit findings?
Based on HMRC’s supervision findings, the most frequently cited failures are:
Incomplete beneficial ownership documentation for limited companies, particularly where PSC records are out of date
No written risk assessment, or one that defaults to ‘low risk’ without documented reasoning
Engagement letters that don’t include a compliant AML statement
Missing or out-of-date identity documents for existing clients onboarded before current CDD standards applied
No process for reviewing client risk ratings as circumstances change over time
For a detailed guide to CDD requirements and building a compliant AML workflow across your practice, see our AML compliance and client due diligence guide for accounting practices.
How does BrightPropose by Bright compare to alternatives for client onboarding?
The main alternatives for proposal and engagement letter software in the UK market are Ignition, GoProposal, and Senta. Ignition is strong on fee management, automated billing, and client acceptance workflows. GoProposal is popular with value-pricing firms for its structured fee calculation approach. Senta integrates onboarding workflow with practice management for smaller UK firms.
BrightPropose by Bright is purpose-built for UK and Irish practices and integrates directly with BrightManager by Bright, meaning a new client accepted via BrightPropose feeds directly into your practice’s workflow without manual re-entry. Combined with Inform Direct by Bright for Companies House compliance, it gives practices a connected onboarding-to-compliance workflow for both sole traders and limited company clients.
This content may have been developed with the assistance of AI tools. Content is reviewed by a member of the Bright team before publication. Guidance on legislation can be obtained from your industry body.
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