Trading as a sole trader is the simplest and easiest to administer form of business structure.
It is relatively easy to set up and start to trade as a sole trader. You complete a form and notify HM Revenue and Customs that you are operating as a sole trader (form CWF1). HM Revenue and Customs will issue you with a 10 digit unique tax reference number. You will then be required to prepare and submit a self assessment personal tax return every year that you operate as a sole trader.There are a number of advantages and disadvantages of operating as a sole trader:
- Simple – It is the easiest business structure to set up.
- Control – You are in total control of the business.
- Switching – should you decide switch to a limited company it is a simple process.
- Confidential – you don’t need to submit your accounts anywhere.
- Unlimited Liability – if the business gets into financial difficulties then you will be personally liable for all business debts.
- Raising Finance – unincorporated businesses (another name for a sole trader) can find it difficult to raise finance from banks.
- Tax – sole traders have an additional tax liability of class 4 NIC which is assessed on business profits.
- Economies of Scale – sole traders can find it difficult to benefit from economies of scale which larger businesses benefit from such as discounts for bulk buying, additional finance and additional resources.
Contact Stewart Accounting to discuss how we can help with your sole trader business.
I started a self employed courier business in May 2011 and Mark was recommended to me to prepare my end of year accounts and tax liability. He did this in a really quick and efficient manner. He is a really helpful person and I will be using Stewart Accounting Services in the future.