Becoming a Sole Trader
Sole trader is the term given to the business structure that you use when you are self-employed. You enter into contracts in your own name and have unlimited liability; this means your personal assets are at risk if the business fails.
Checklist of initial things to consider when starting out:
- Inform HMRC as soon as possible: https://www.gov.uk/log-in-file-self-assessment-tax-return/register-if-youre-self-employed. The deadline for doing this is 5 October following the end of the tax-year in which you started trading; however we would recommend this should be one of the first things you do before or when you start trading.
- Do you want to choose a business name? If you want a business name you must still display your own name on all business invoices, quotations and stationery, as well as on things like your website. For example, you should state ‘John Smith trading as JS Designers’. Choosing a business name does not protect the name or stop anyone else using it – consider registering it as a trademark if the name is of particular importance to you.
- What level of turnover do you anticipate in a year? If more than £85,000 pa you will be required to register for VAT. Competex can advise and, if necessary, do this for you.
- Will you be employing others to help you run your business? If so you will need contracts of employment for them and will need to operate payroll services, including filing returns with HMRC. Competex can provide full payroll services for any employees you have.
- Check with your local authority whether you need to pay business rates or need a special licence to carry on your business
- Consider what insurances you might need such as public liability
- There is no legal requirement to set up a separate business bank account, but unless your business is very small, with nominal transactions, it is usually a good idea to do so. This means that personal transactions do not get mixed up with business ones and it is clearer to see what money the business has available and how it is doing.
- How will you manage the book-keeping? Recording all your transactions using a simple accounting package is the easiest way forward and saves a lot of time and effort compared to keeping manual records. Competex can provide you with such a package, along with unlimited support.