How to set up as a sole trader

Setting up as a sole trader is a popular way to start a business in the UK. It’s relatively simple and straightforward, and there’s a lot of support and advice available. The main downside is that you’re completely responsible for your business, which means you’re liable for any debts it incurs.

You also won’t have the same protections as limited companies, so it’s important to make sure you understand the risks before you start. If you’re thinking of setting up as a sole trader, there are a few things you need to do:

You’ll also need to get a business bank account and set up appropriate accounting records. It’s also a good idea to get some professional advice from an accountant or solicitor. Once you’ve done all that, you’ll be ready to start trading! Good luck

What is a sole trader and who qualifies?

A sole trader is a business owner who’s legal entity is called as self-employed. This means that they are personally liable for any debts incurred by the business. A sole trader can be either self-employed or employ others. The main advantage of being a sole trader is that you have complete control over your business.

You are also able to keep all of the profits after tax. The main disadvantage is that you are personally responsible for any debts incurred by the business. This can put your personal assets at risk if the business is unable to pay its debts. Being a sole trader also means that you have to complete additional paperwork and may need to register with HMRC.

What does the distinction between business and owner mean in practice? it means that sole traders are personally responsible for:

• Keeping accurate records

• Recording profits and losses

• Paying business debts

• Retaining invoice & receipts for six years

If you can relate to any of the following then you should set up as a sole trader:

1. You earned more than £1,000 from self-employment during the tax year.

2. You must prove that you’re self-employed for tax credits or benefits.

3. You voluntarily wish to make voluntary Class 2 National Insurance contributions.

How to register as a sole trader

Registering as a sole trader is a simple process that can be completed online in just a few minutes. You will need to provide your personal details, including your name, address and date of birth. You will also need to choose a business name and register it with the Companies House. Once you have registered, you will be able to apply for a business bank account and start trading.

Sole traders are typically self-employed individuals who run their own businesses and are responsible for filing a tax return though the self assessment system. You can register online using the HMRC website.

This structure is relatively simple and easy to set up, which makes it a popular choice for small businesses. However, as the sole owner of the business, you will be liable for any debts or losses incurred. This means that it is important to keep good records and maintain a separate business bank account.

Registering as a sole trader is a simple process that can be completed online in just a few minutes. You will need to provide your personal details, including your name, address and date of birth.

Here are a few of the HMRC requirements for sole trader business names:

• You can use your own personal name

• No offensive words can be used

• The term ‘limited’ in any form including ‘limited liability partnership’ or ‘Ltd’ or prohibited

• You cannot use any trademarks that are in exgistance

Sole trader responsibilities

As a sole trader, you are legally responsible for all aspects of your business. This includes complying with all applicable laws and regulations, ensuring that your products and services meet customer expectations, and keeping accurate financial records. In addition, you are also responsible for paying any taxes and other debts that your business incurs.

While being a sole trader gives you a great deal of freedom, it also means that you have to bear the full brunt of any losses or debts that your business incurs. As such, it is important to carefully consider all of your responsibilities before starting your own business.

Sole traders must also produce accounts which include detailed records of business sales and any associated expenses.

There is a legal requirement to submit a Self Assessment tax return each year, paying Income Tax on profits. Class 2 and Class 4 National Insurance contributions also apply to sole traders, If you have just arrived in the UK you must apply for a National Insurance number.

Should your annual turnover as a sole traders exceed £85,000 there is a legal requirement to register for VAT.

Sole trader advantages and disadvantages

Being a sole trade is quite simple to get set up with HMRC, this is why a number of freelancers and small business owners start out with this type of business structure. One of the advantages is that all you need to do is to register for Self Assessment, pick a business name, and you’re officially a sole trader!

Advantages of being a sole trader :

1. You’re in complete control of your business – As the sole trader, you get to make all the decisions regarding your business.
2. You keep all the profits – After you’ve paid tax on your profits, you get to keep the rest as income.
3. It’s relatively easy and inexpensive to set up – Unlike other business structures, there’s no need to register with Companies House or file annual accounts with HMRC.
4. You have flexibility in how you work – As the boss, you can decide when and where you work. You can also choose which clients you work with and what projects you take on.

Disadvantages of being a sole trader:

1. You have complete liability for debts incurred by the business – As a sole trader, you’re personally liable for any debts your business can’t pay. This means creditors could go after your personal assets, such as your home or savings, to cover the cost of what you owe them.
2. Your income is limited by the amount of hours you can work – Unlike other business structures, there’s no legal distinction between your personal and business