When you start out on the road to building a business empire for yourself you may decide that operating as a Sole Trader is at least for the time being the best option.
You will probably find that it is the easiest way to get started in business if you are them only person directly involved in running the business.
- the business is owned and run by you
- you can still employ temporary or full time Employees
- you can deal with and enlist the services of any external specialist as and when you need them
- a Sole Trader does not have a separate legal existence in the way that a Limited Company does. You are therefore personally liable for the debts of your business – known as unlimited liability
- you can change your status as a business whenever you decide the time is right
You cannot escape all the red tape that goes with being involved in any business simply by operating as a Sole Trader even though it is fairly easy to get started and only a small amount of Capital investment may be required.
- you should register with HMRC the moment you start out as a Sole Trader – there is a financial penalty if you don’t
- you do not need to notify Companies House nor deal with any administrative or accounting requirements required of Limited Companies
- you will need to submit an annual Self Assessment Form to HMRC
- you need to keep accurate and up-to-date records of all business transactions
- you will pay Income Tax and National Insurance on all profits. Losses can be offset against Tax on other income
You may enjoy the minimal bureaucracy involved in operating as a Sole Trader as you will have complete control over your business. However do not lose sight of the fact that as a Sole Trader you are ultimately responsible for any liabilities should anything go wrong. This can impact on your home and all personal assets leaving you vulnerable to bankruptcy if your business liabilities impact on your personal assets and they are insufficient to cover your debts.
You should therefore get expert advice on
- which business set-up is best for you.
- Accounting & Book Keeping procedures: plenty of Accountants provide services tailored to Business Start Ups