As a sole trader, your business is owned entirely by you, grown by you and ultimately succeeds or fails by you. This also means you are entitled to all profit that the business makes.
Becoming a sole trader is simple. All you have to do is register your business name and you can start trading.
There are huge incentives to becoming a sole trader but with them come terrifying or - depending on your personality - gratifying, side effects.
Some of the most famous entrepreneurs in the UK started out as sole traders. From Lord Sugar, who launched his first business with £100 selling aerials out of the back of a van, to Duncan Bannatyne, who started his entrepreneurial career with an ice cream van back in the eighties.
The benefits of being a sole trader:
That's right. You are the sole owner and any money you make whether it's £10mil or 10p will land squarely in your pocket.
Forget pushy investors. As a sole trader, no one can tell you what to do. Your business and your future are in your hands. This not only speeds up decision making but also means if it goes wrong there'll be no one breathing fire down your neck. Plus you set your own targets for growth.
Sole traders can offer a more personalised approach to their customers. You are the only person the customer interacts with. This can result in strong relationships that can turn one-off customers into loyal repeat buyers of your products or services.
To register yourself as a sole trader all you need to do is inform HRMC that you intend to be self-employed and you can start trading straight away.
Accountants generally charge lower rates for sole trader accounts as there is less work for them to do. As a sole trader, all you're required to complete is a profit and loss account.
PR consultant Michelle Bayliss has been a sole trader for 19 years. She believes that "Having the freedom to strike a perfect balance between work and social life is the best thing about being a sole trader."
The challenges of being a sole trader:
As a sole trader, the law sees you and your business as one. This means should your business fall on hard times and find itself in debt, you as the business owner will be liable. If the business is declared bankrupt, your personal assets are on the line. This also applies if a customer sues your business. In the eyes of the law, they're suing you.
As a sole trader responsibility for everything comes down to you. You make the decisions. The success or failure of the business rests on one person's shoulders - yours.
You have to do every job required from sales to web development. There's no one there to help you out when you're busy. It's down to you to stay on top of everything, which inevitably means working longer hours to make sure everything's in order.
Sole trader Jane Lee owns Dexterity.com and is a technology PR consultant. She confesses, "I can get lonely and it's hard to maintain morale when work isn't going smoothly."
Although you can book holidays or have a day off sick without ever having to seek approval, it also means that your business is shut down when you do so.
How to get a grant as a sole trader:
There are over 6,000 grants available for UK businesses and many of them specifically target sole traders. Grants are a great way of funding your business as they can provide capital for specific projects. Most importantly, the money doesn't have to be paid back.
Qualifying for a grant can also give banks confidence in you and your business, which could lead to extra funding.
The sole trader small print
If you want to become a sole trader you can do so with Smarta - we offer a company registration service powered by the National Business Register. You can search for available names then register a business name, or set up a company and/or register a trademark with us. You will receive a professional binder with all your official documents via post within 3-days.
Smarta Formations is the quickest and easiest way for you to register your limited company. All the hard work is handled for you.