When it comes time to set up your new company, you will need to determine if you are going to set it up as a limited company or as a sole trader. If you have chosen the latter, there are a few things to keep in mind. Sole trader continues to be the most popular way to set up a new company and the registration is very straightforward and simple.
One of the reasons that a sole trader company is so popular is because it is so easy to get started. Not only is the registration easy but the record keeping is also simple. With this type of business formation, you are entitled to keep all your profits after you have paid your taxes, which is another reason that it has become so popular.
A sole trader company is simply one that is owned by only one person and this same person maintains complete control over how that company is operated. Many businesses begin as a sole trader business and then grow into partnerships or limited companies. Most sole trader businesses are relatively small and have very few employees, if any.
Studies have shown that the majority of businesses operating as sole traders are in the service industry. This includes many retail shops and bakeries, as well as photographers, writers, hairdressers and many others. If you are currently earning money through anything other than a salary or commission, then you may already be operating as a sole trader. In most cases, those who are self employed are considered sole traders of their own businesses. Even if you have not earned enough profit that requires you to pay tax, you should register for self-assessment with HMRC if you are operating as a sole trader.
If you are trading as a sole trader, then you need to register with HMRC by October 5 in the second tax year after you have begun your trading. So, if you began on January 2018 then you must register for self-assessment by October 5 of that same year.
In order to register as a sole trader for VAT, you will need to complete a few forms and submit them to HMRC. You will also need to meet certain legal qualifications before you can officially open for business. You have to choose a business name and register that name and then be sure to register with HMRC within the first three months of your startup. If you miss this deadline you will be forced to pay a fine. The process is not difficult by any means, but it is intricate and must be done in the order that it is required if you plan to begin trading soon. You can register your business name with Companies House and then once you have everything in order, you can begin trading as a sole trader; at least until your business grows to the point that you may want to change it to a limited company.