If you’re a small (or micro) business owner who plans on keeping things this way for the foreseeable future, there’s a good chance that setting up as a sole trader will be in your best interest going forward.
When you operate as a sole trader there are a large number of advantages that make it an ideal option for smaller businesses, both when it comes to setting up your business and registering with HM Revenue and Customs (HMRC), and once you’ve been trading below a certain threshold for a number of years.
Three of the most significant advantages of operating as a Sole Trader are:
When you’re a sole trader you have complete control over the running of your business, both in terms of your daily workload and the strategic decision making that takes place to determine the direction and (potential) growth strategy of your business.
It’s a common misconception that when you operate as a sole trader you can’t take on staff members. This isn’t true; though you’re the only entity (person or company) that can have a stake in your business, you can take on staff to help you complete your work. Of course, once you take on more than a couple of staff members you may find that incorporating into a Limited Company (Ltd) is a more tax-efficient alternative for your business.
Sole traders have to complete far less paperwork than those who run (and are thus director of) a Limited Company. As a sole trader you have no annual accounts to prepare, as your income and expenses are simply entered into an annual Self-Assessment tax return, where you’ll be required to pay Income Tax and National Insurance Contributions (NICs).
If you’ve not done so already you should consider hiring an accountant as soon as possible, as they’ll be able to walk you through the process of registering your business and applying for Self-Assessment in no time, leaving you free to work on making your business a success.
Easy Access to Your Income
One rarely spoken of advantage of operating as a sole trader rather than as a Limited Company is the fact that you have easy access to the revenue you make. Whether it’s paid into a business bank account or your personal account, you can extract this income with ease.
Directors of Limited Companies can only receive the income from their business as a salary, dividend, or loan once your company pays Corporation Tax on it, as the profits your company make are technically owned by your company, not you, a process which slows down your ability to access your income.
Small and Medium-Sized Business (SME) Accountants
There are, of course, several disadvantages of operating as a sole trader compared to operating as a Limited company, many of which we discussed in our recent article on whether you should operate as a sole trader or Limited Company.
To speak with a professional, experienced accountant to discuss whether the advantages of being a sole trader stack up for your business, contact us today on 020 8780 2349 or get in touch with us via our contact page to arrange a complimentary, no obligation meeting.