Many new start-up businesses will set up as a sole trader as it is the simplest and easiest way to set up in business. There is no requirement to pay any registration fees, or annual fees, and all profits are kept by you as an individual. However, there are other important aspects of this business structure to be aware of before setting up, for example that you are personally liable for all debts of the business.
Before deciding on the structure for your new business, it is a good idea to speak to a business lawyer. This advice will help you to choose the structure that best suits your circumstances and goals. Contact a commercial solicitor in our business services team for more information.
What is a sole trader?
A sole trader is an individual who owns and runs a business. Under the law, the individual and the business are not considered separate. This means that, as the owner, you are personally responsible for the business’s bills, accounting and losses. However, it also means you are entitled to the business’s profits in their entirety.
How do you set up as a sole trader?
Setting up as a sole trader is very straightforward compared to the formation processes of other types of business, which is why it is a popular structure for those starting a business on their own.
You must notify HMRC that you are a sole trader by registering for self assessment. This should be done within three months of being a sole trader, otherwise you could be fined.
You should also choose a suitable name for your business; this can be your own name or another name, but it must not already be in use by another business. There is no requirement to register your business name, however, you are required to include your own name and your business name (if they are separate) on all invoices, letters and other documents.
What are the responsibilities of a sole trader?
The administrative work for sole traders is relatively minimal. You will need to maintain a record of all your sales and expenses and submit a self assessment tax return each year. If your business’s turnover exceeds £85,000 in a year, you must also register for VAT.
Why do I need legal advice for setting up a sole trader business?
There is a lot to consider when setting up your own business and it is important to choose the right structure. The biggest disadvantage to becoming a sole trader is that if your business runs into financial difficulty, you may have to give up your personal property to your creditors. Our commercial solicitors will take the time to get to know you and your goals and explain the business structure options to you clearly. We will provide bespoke, pragmatic advice on which is right for you.
If you decide to set up as a sole trader, we can advise on all aspects of the formation process, including applying for local authority licences (where necessary), taking on employees and drafting your business terms and conditions.
Contact our Commercial Solicitors Sheffield for Sole Trader Advice
Our commercial lawyers are based in Sheffield and serve clients in Rotherham, Chesterfield, Barnsley, Dronfield and further afield. If you require sole trader advice, call us on 0845 225 2635 or fill in our online contact form and we will get back to you shortly.