When you start your own business you may decide to set up as a sole trader. Ellis & Co has come up with a list of considerations, below, to take on board when becoming a sole trader:
- For tax purposes you will need to register as self-employed. Even if you don't draw on your profits they are still taxed and any losses can be offset against tax on other income.
- As a sole trader you will become fully responsible for all your business debts.
- Be prepared to fully take on the management role and responsibilities. These come with the sole ownership of your business. The very nature of being a sole trader is that whilst you may seek advice and support, you are the decision-maker - the business is yours!
- Many sole traders finance the venture with their own personal monies when setting up their business. This a responsibility that may have an impact on those close to you so think carefully - is there anyone who needs to be prepared to go with you in this venture - in spirit and in commitment?
- At least as a sole trader any profits will be yours, but is there anyone else to whom you owe some recognition and a share for their support of your venture?
- Consider what could happen if you decide to stop trading or have to stop because of unforeseen circumstances. Do you need a contingency plan, an escape plan or a development plan for continuity of your business with someone else?
Being a sole trader may not seem to bring the complexity of a company with shareholders or partners to your business. However understanding good practice like developing a Business Plan, which Ellis & Co can help you with, will provide you with a framework for success.