What is a Sole-Trader?
A sole proprietorship, also known as the sole trader, individual entrepreneurship or proprietorship, is a type of enterprise that is owned and run by one person and in which there is no legal distinction between the owner and the business entity.
That’s the official definition of a Sole-Trader, but to help put it a bit more in to plain English, this is the simplest kind of business structure. It’s just you, your computer and your dog - there’s nobody else involved in running the business.
Do you need to register as a Sole-Trader?
Simple answer – YES.
To set up as a sole trader, you need to tell HMRC that you pay tax through Self-Assessment.
You have to do this by 5th October after the end of the tax year (which runs from 6th April to 5th April the following year).
What are your responsibilities?
You’ll need to:
keep records of your business’s sales and expenses
send a Self-Assessment tax return every year
pay Income Tax on your profits and Class 2 and Class 4 National Insurance - use HMRC’s calculator to help you budget for this
As a Sole-Trader, do I need to be concerned with VAT?
As with any other business structure, you must register for VAT if your turnover is over £85,000.
You can register voluntarily if it suits your business, for example if you sell to other VAT-registered businesses and want to reclaim the VAT.
Do I need to register a business name?
The easy answer is – NO.
You can trade under your own name, or you can choose another name for your business, it would all depend on what image you wished to put out to the market place.
Although, you must include your name and business name (if you have one) on official paperwork, for example invoices and letters.
Sole trader names must not:
include ‘limited’, ‘Ltd’, ‘limited liability partnership’, ‘LLP’, ‘public limited company’ or ‘plc’
be the same as an existing trade mark
If you want to apply to register a trade-mark of your own, you can do so:
Your name also cannot contain a ‘sensitive’ word or expression, or suggest a connection with government or local authorities, unless you get permission.
To use ‘Accredited’ in your company’s name, you need permission from who-ever you are claiming to have that accreditation from.
Check which words you need permission to use, and who from.
If in any doubt – “SEEK HELP”
What are the Pros and Cons of being a Sole-Trader?
The Pros of Being a Sole Trader
You Have Full Control
You Can Offer a Personal Touch
You Can Easily Change Your Business Structure Later
Ownership Over Profit
Setting Up as a Sole Trader is Easy
There’s Less Admin Involved
You Have More Privacy as a Sole Trader
The Cons of Being a Sole Trader?
It Can be More Difficult to Get Financing
You Make All the Decisions
You May Have Less Free Time
You Have Less Flexibility When it Comes to Tax
Your Business May Not Be as Appealing to Clients