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.
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.
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.
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.
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.
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.
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.
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.
Speak to us for details on accounting under the Construction Industry Scheme (CIS).