You Are The Business As A Sole Trader

If you are starting a new business, do you want to set up as a sole trader? It’s certainly an exciting time as you think of what to call your company, how to brand the business and get noticed by those all-important customers. There is certainly a lot to do, but part of the process is picking the right structure for your new company. You will want to adhere to all the legal requirements and to also stay tax compliant. Whether you set up as a sole trader or a limited company is an important consideration. If you are not sure whether you should register as a sole trader, our latest blog explains what it entails, the benefits of being a sole trader, as well as the disadvantages and how team4 can help you.

What does being sole trader entail?

 A sole trader is a self-employed person who owns and runs their own business as an individual. The simplest way to run your business is to register as a sole trader. By doing this, you do not have to pay any registration fees, but you must register as self employed. You will need to inform HMRC and you will then pay tax through Self Assessment. This means filing a tax return every year. It’s at this point you will have to decide if you are going to do the accounts yourself or whether you need a bookkeeper to do them for you. By going down the route of being a sole trader, you get to keep all the profits you make. Sounds good? However, you are also personally liable for any debts that your company incurs. This could be a risky way to do things if your new business needs a lot of investment. In short, if your company runs into financial trouble, creditors can come after your house and possessions.

Benefits of being a Sole Trader

• No requirement to register with Companies House
• Can start working straightaway
• Complete control with no shareholders or directors
• No Corporation Tax or Accounts to Companies House
• Easier to set up than a Limited Company
• Simple to switch to being a Limited Company in the future
• Financial information is kept private
• You are your own boss – you are the business

You will need to register within three months of starting up your business and then submit an annual Self Assessment form and pay Class 2 NICs.

Disadvantages of setting up as a sole trader

• Unlimited liability – you are personally responsible for any debts and losses of the business, including outstanding tax, rent etc.
• Less credibility – not as appealing as a limited company to customers, so check how your competitors have set up their businesses
• More difficulty in getting financing
• Full responsibility – you are accountable for everything and make all the decisions

How can team4 help you as a sole trader?

You will have to maintain accurate accounting records as a sole trader that follow standard accounting practice. These will have to include records of your sales and expenses. You’ll actually find that these are invaluable when completing your annual self assessment tax return. Here at team4, we can help you decide whether this is the most flexible and cost-effective route you should take and also advise you when it’s time to set up as a limited company. The most important thing for us is that the operating structure you decide to implement is the most beneficial one for you and your business. We pride ourselves in helping self-employed people to not only set up their businesses but to also grow them as well. Please get in touch with us so you can decide if starting out as a sole trader is right for you. Call team4 on 01825 763378 or email info@team4bookkeeping.co.uk

Next time we will be looking at Limited Companies in more detail, so stay tuned.