The advantages of becoming a sole trader
One of the most important decisions to make when setting up a business is what structure it will have.
When choosing a suitable business structure it’s important to understand the advantages and disadvantages of different types of business – whether limited company, partnership or sole trader.
Many people choose go down the sole trader route. Self-employment is comparatively simple, plus you retain complete control over your business and get to keep all the profits.
Here are 5 advantages to setting up a business as a sole trader.
Start up
Becoming a sole trader is the simplest and quickest way of starting a business. Before you get started, you must:
- notify HMRC of your intent to become self-employed
- register of self-assessment
- create a name for your business.
Administration
There is less administration involved with self-employment than with other business structures.
Your main duties include filing an annual self-assessment tax return, paying your taxes and maintaining records for your sales and expenses. Furthermore, you don’t need to register for VAT unless your turnover exceeds the £85,000 threshold (in 2017/18).
Things get a little more complex if you’re a contractor or subcontractor in the construction industry.
Freedom
As a sole trader, you have complete control over the direction of your business. There are no directors, shareholders or fellow partners you have to answer to. Self-employment is therefore a good option for individuals who want full control over the development of their business.
Costs
Limited companies have to pay for professional assistance during the process of forming a company. Sole traders are only required to pay for the services of an accountant, resulting in lower operating costs.
Profits
As a sole trader, you receive 100% of your net profits. There are no shareholders to pay dividends to, and no directors or partners to split the profits with. Any assets owned by the business are under your full control.
Contact us
If you’re thinking starting a business as a sole trader, our team of accountants and business advisers are here to help you every step of the way.
Contact us on 01628 631 056 or email tracya@knightandcompany.co.uk for more information on how we can assist sole traders.
Speak to us for details on accounting under the Construction Industry Scheme (CIS).