If you are thinking of branching out on your own but not sure where to start...
This type of business has legally no separate existence from its owner. The person is therefore fully liable for the debts of the business. Sole traders will usually transact business in their own name.
Although we do not offer this as a service in itself there are a number of ways we can help.
A sole trader is the simplest, non-regulated form of trading where an individual acts solely on his own account; he or she makes all the decisions on business matter and takes all the risks. The main advantage is that the sole trader takes all the profit generated by the business but the disadvantage is that they are also personally liable for all the debts of the business. Apart from registering as self employed with HM Revenue and Customs there is little or no paperwork involved to start trading.
To register, you need to fill out and complete Form CWF1 from the HMRC site.
A limited company is considered to be a separate legal entity from its shareholders. The Companies Act provides the legal framework under which companies are incorporated and the regulations under which companies must operate. Companies are subject to statutory regulations which include the filing and reporting of information to Companies House, and, in this respect, are more onerous to administer than sole traders or partnerships. However, the benefits of forming a limited company greatly outweigh the disadvantages in that the shareholders have limited liability because they are not personally responsible for the debts of the company, only for the full amount payable for their shares and the name of the company is protected because it is considered to be an asset of the company property after incorporation at Companies House.
Individuals who are prepared to accept all the risks and rewards of the business . It is particularly suitable for those who have low financial risks in their business, for example very little likelihood of being sued for the product or service provided. i.e. Music teacher.
As a sole trader you will need to submit an annual self assessment form to the Inland Revenue and keep accurate and up-to-date records of all business transactions and accounts. You will also pay income tax and national insurance contributions on any profits. Losses can be offset against tax on other income.
The Inland Revenue will send you a Self Assessment tax and NI form to fill in.
Though you will have registered as 'self employed', you won’t automatically be VAT registered.
Once you reach a certain annual turnover (£61,000 at the time of writing) you will need to register for VAT which we can help you with - please see VAT Registration.