We live in a time where information comes easily and people are no longer as afraid to open up small businesses as they were when the first recessions started to hit around the world in the mid-2000s. More countries are trading with one another, people are travelling more and products and services are no longer bound to the country that you are from. Technology has also played a really big role in the way people think and use their platforms to advertise and grow their customer base and this has largely helped with the confidence of individuals wanting to become small business owners.
Many businesses are now also trading online so it makes it even easier for their products and services to be accessed by potential clients. Online advice and assistance to individuals who might consider the option of opening their own businesses or working for themselves under their own name and want to make sure that they are on the right side of the law as well as HMRC. This is just one of the ways that you can be certain that you have received and filled in everything you need to as a sole trader.
We asked Adam from IgniteSEO who works closely with sole traders and understands the challenges that they can face. He said “Going at it alone is hard enough, without having to double your accounting online marketing and HR by yourself. I strongly recommend finding an affordable trusted supplier so you can focus on the things that are important to build a reputable business.
What is a sole trader?
When you own a business where you are not just the owner, but you could also have the name of the business registered as your name. You won’t need to add on any other partners or shareholders who are financially contributing to the business set up when you register yourself as a sole trader. This would also mean that you are responsible for the tax, invoices, administration and financial planning of the business and should anything go wrong, you will not only be liable for the cost of the loss in revenue and assets, but you stand a great chance of undergoing asset forfeiture to retain lost funds owed to the bank, investors clients and HMRC.
This will only happen when you have a business that you have registered where you have borrowed money from the bank to cover set up costs. As a sole trader, you are solely responsible for the business in every way shape and form. This might seem like a tough decision to make, but there are so many positive attributes to being a sole trade that would make it so much more profitable than being an LLC. Here are some of the highlights:
- You can determine your own working hours and you can enjoy more down time over holidays
- You can determine what amount you would like to consider as a salary if you intend to pay one to yourself
- You avoid sharing your earnings with other members of staff or even other shareholders once you have covered any overheads that you might have
- You can avoid set up costs, investment fees and bank loans if you are a travelling trader or only based online
When is the perfect time to become a sole trader?
Your first order of business would be to have a really great business plan. You will need lots of direction when taking on the role of a sole trader because it needs to be sustainable for at least 6 months before you are likely to start seeing a profit. The idea is to see some kind of profit if you intend on growing your business and the advice from a firm like DNS Associates is important.
An accountant’s advice is always valuable because it helps to get the relevant legal fees and paperwork filed and paid on time. If there is any information that you need them to give you regarding your registration, then do it at least 3 months in advance so that they have the time to organise it for you. Those papers and forms are most important if you wish to trade with other companies and not just individual clients.
A paper trail is an advantage towards your ability to run your business so make sure that you get the correct advice and financial planning. You might not have all the small details like overheads to be concerned about, but you do want what you are doing to come across as professional and trustworthy. Once you have gotten all of this information together, you can then do so with the HMRC. There are certain time periods that you need to register your business and you have up to 24 months within a tax year and up until the 5th of October within the second tax year.
If you were unable to within the otherwise stipulated trading time you might incur late fees. These are legally binding dates and if you are looking to remain a trader without any late fines then it would be best advised to seek the assistance of a tax practitioner or accountant to assist you with making sure that everything is done and handed in on time.
Registration and information
You can also register as a sole trader after you have started earning over 1000 pounds even if you haven’t registered a full business under your name. Once you have registered for a self-assessment via the HMRC website, you can obtain a unique 10 digit tax number and fill in the relevant forms, you will need to make sure that all your information like your home address, ID number, contact details, email addresses and mailing address are all filed correctly in case of any correspondence between yourself and the HMRC.
You will need to report on everything that you have earned so taxable invoices are very important. When you are dealing with other businesses you need to ask them for their tax information on the invoices and you will need to include a business stamp to authenticate that your business is valid. It will help you to be able to claim back tax on items that you have bought from other small businesses as well. The more information you can submit, the better the chance you have of getting money back from the HMRC after the financial year-end so if you are interested in becoming a sole-trader then make sure you have all the valid forms, the right advice and the best firm assisting you as you move forward.