{"id":4579,"date":"2022-12-03T12:31:53","date_gmt":"2022-12-03T12:31:53","guid":{"rendered":"https:\/\/sample.kvgloballogistics.com\/?p=4579"},"modified":"2022-12-03T12:31:53","modified_gmt":"2022-12-03T12:31:53","slug":"setting-up-your-business-the-advantages-of-being-a-sole-trader","status":"publish","type":"post","link":"https:\/\/ttaccountancy.uk\/blog\/setting-up-your-business-the-advantages-of-being-a-sole-trader\/","title":{"rendered":"Setting up Your Business: The Advantages of Being a Sole Trader"},"content":{"rendered":"\n

When it comes to registering your business, you have a big decision to make. Today, we\u2019re looking at the advantages of being a sole trader and what it means for your venture over the long term.<\/strong><\/em><\/p>\n\n\n\n

Self-employment is on the rise, with more and more individuals deciding to go solo and set up their own businesses. As of March 2018, there are 4.8 million individuals<\/a> registered as self-employed in the UK, accounting for a healthy 15% of the total workforce.<\/p>\n\n\n\n

With benefits including flexibility and the freedom of being your own boss, it\u2019s little surprise that so many people are opting to take this route. However, there\u2019s one important decision you need to make: how should you register your business? Here, we look at the advantages of being a sole trader.<\/p>\n\n\n\n

What Does Being a Sole Trader Mean?<\/h2>\n\n\n\n

Being a sole trader, or sole proprietor, is essentially what it sounds like. You\u2019re trading as a single person, meaning that your business \u2014 including its assets, any profit it makes, and also any liabilities it accrues \u2014 belongs to you. If you\u2019re setting up your own business, whether you\u2019re a freelancer delivering a service to other businesses or you\u2019re selling products from your home to customers, you\u2019ll need to register as self-employed with HM Revenue & Customs<\/a> (HMRC) as soon as you can.<\/p>\n\n\n\n

So, now you know what a sole proprietor is, let\u2019s take a look at some of the pros and cons of establishing a sole trader business.<\/p>\n\n\n\n

The Advantages of Being a Sole Trader<\/h2>\n\n\n\n

Registering as a sole trader isn\u2019t the only option for budding business owners. You can instead register as a limited company. We\u2019ll delve more into this alternative shortly, but it\u2019s important to know that there is a clear distinction between the two, and the one which will best benefit your business will depend on your immediate needs and long-term goals. You may find that the advantages of sole proprietorship are perfect for you and your business, but what exactly are they?<\/p>\n\n\n\n

Full Control<\/h3>\n\n\n\n

The likelihood is you\u2019ve set up your own business \u2014 or are in the process of doing so \u2014 because you want the freedom to do things exactly how you want to. You\u2019re probably tired of working for someone else and helping them achieve their dream, and instead want to focus on your own. As a sole trader, you\u2019ll have full control of your business, and will be able to run it how you want to without the interference of others.<\/p>\n\n\n\n

Ownership of Profit<\/h3>\n\n\n\n

As a sole trader, all the profits you make belong to you. You won\u2019t have shareholders to pay, or need to split your profit in any way. You may decide to work entirely alone, which will ultimately maximize your potential profit and keep your costs low. However, should you decide to get some extra help for your business, you can do so by\u00a0employing contractors<\/a>\u00a0as and when you need them. As contractors are also self-employed individuals, they alone are responsible for their tax contributions. You needn\u2019t worry about your profits going towards covering National Insurance contributions or sick pay \u2014 you simply pay your contractors for the work completed and focus on the most important thing to you: growing your business.<\/p>\n\n\n\n

The Personal Touch<\/h3>\n\n\n\n

If you\u2019re offering a personal service, one which relies on your reputation as an expert and you showcasing your personality, then opting to register as a sole trader can be a good move. Limited companies can sometimes come across as too \u201ccorporate\u201d, which can put off potential clients or customers, especially if you\u2019re working with people in your local area. Establishing yourself as a sole trader can help build up confidence and sets you apart from faceless, generic entities.<\/p>\n\n\n\n

Easy to Change Your Mind<\/h3>\n\n\n\n

Depending on your long-term goals and how quickly you grow (for example, you might project that five years down the line you will be earning 6-7 figures), you may later decide that you\u2019ll benefit more from registering as a limited company. This does require a bit of paperwork, and paying tax as a limited company does differ from when you\u2019re a sole trader (in fact, you can often make significant savings!), but it\u2019s much easier than setting up as a limited company and then deciding you want to operate as a sole trader. We always recommend getting the advice of a qualified accountant to support you as you make your decision.<\/p>\n\n\n\n

The Disadvantages of Being a Sole Trader<\/h2>\n\n\n\n

While there are clearly plenty of advantages of being a sole trader, there are also downsides that you need to be aware of before you make your decision. It\u2019s often for these reasons that businesses opt to instead register as a limited company. As with any business decision, to make the right one, you need to carefully weigh out the pros and cons.<\/p>\n\n\n\n

Liability for Debt<\/h3>\n\n\n\n

When you register a sole trader, your business becomes an extension of you \u2014 your business and personal finances are considered by HMRC as one. This means that should your business get into debt, you\u2019ll be liable. To dissolve these debts, you may need to rely on your personal savings or assets, including your home. Therefore, it\u2019s important to have your finances and forecasts in order so that you can safeguard against this.<\/p>\n\n\n\n

Making Decisions<\/h3>\n\n\n\n

Depending on your natural proclivities, this may or may not be a disadvantage. It\u2019s likely that one of the reasons you decided to start your own business is so that you have the power and authority to make the big decisions yourself. However, as your business grows, this may become overwhelming, as every decision about your business and its future rests on your shoulders. Of course, you can consult other professionals, but this will likely come at a cost and affect your bottom line.<\/p>\n\n\n\n

Access to Funding and Customers<\/h3>\n\n\n\n

While it has no foundation in truth, there\u2019s unfortunately the perceived notion sometimes that sole traders aren\u2019t as \u201cprofessional\u201d as limited companies. Limited companies benefit from a certain prestige and sense of security that sole trader businesses may not always possess. Because of this, some clients or customers may see your business as more high-risk and opt not to work with you, solely based on your sole trader business status.<\/p>\n\n\n\n

Sole traders can also find it more difficult to raise funds for their business. Banks won\u2019t always lend money to sole traders \u2014 and when they do, it\u2019s often a much lower amount than what you could receive as a limited company. If your business relies on having substantial start-up capital and you don\u2019t already have the funds to invest, you may run into some roadblocks on your journey as an entrepreneur.<\/p>\n\n\n\n

Is There An Alternative?<\/h2>\n\n\n\n

Now you know the advantages \u2014 and disadvantages \u2014 of being a sole trader, you should be able to make an informed decision about your business model. But, if setting up a sole trader business isn\u2019t for you, there is an alternative: registering as a limited company.<\/p>\n\n\n\n

A common misconception is that limited companies are for larger businesses with multiple directors and numerous employees, but that\u2019s not always the case. A limited company can also be run by one person, and you may even do all the work yourself. However, when making the decision whether to register as a sole trader or limited company, it\u2019s important to bear in mind that each has their own benefits and drawbacks. Your choice will ultimately depend on the industry you\u2019re in, the people you want to work with and the level of control you want over your business.<\/p>\n\n\n\n

Confused about whether setting up a sole trader business is the right step for you? Our team of chartered accountants are on hand to support you with advice on your tax and business needs.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

When it comes to registering your business, you have a big decision to make. Today, we\u2019re looking at the advantages of being a sole trader and what it means for your venture over the long term. Self-employment is on the rise, with more and more individuals deciding to go solo and set up their own […]<\/p>\n","protected":false},"author":1,"featured_media":4580,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"om_disable_all_campaigns":false,"_mi_skip_tracking":false,"_mbp_gutenberg_autopost":false},"categories":[125,127],"tags":[],"_links":{"self":[{"href":"https:\/\/ttaccountancy.uk\/blog\/wp-json\/wp\/v2\/posts\/4579"}],"collection":[{"href":"https:\/\/ttaccountancy.uk\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ttaccountancy.uk\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ttaccountancy.uk\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/ttaccountancy.uk\/blog\/wp-json\/wp\/v2\/comments?post=4579"}],"version-history":[{"count":0,"href":"https:\/\/ttaccountancy.uk\/blog\/wp-json\/wp\/v2\/posts\/4579\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/ttaccountancy.uk\/blog\/wp-json\/wp\/v2\/media\/4580"}],"wp:attachment":[{"href":"https:\/\/ttaccountancy.uk\/blog\/wp-json\/wp\/v2\/media?parent=4579"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ttaccountancy.uk\/blog\/wp-json\/wp\/v2\/categories?post=4579"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ttaccountancy.uk\/blog\/wp-json\/wp\/v2\/tags?post=4579"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}