By registering as a sole trader or as part of a partnership you are allowing your new company the room to grow before tying it down to a business form which could limit you at such an early stage.
Setting up a new business as a sole trader or partnership couldn’t be easier; all you need is your name, date of birth, address, national insurance number, start date and to decide whether you’re starting as a partnership or as a sole trader. Then you’re ready to start trading.
A sole trader is an individual who is self-employed. As a sole trader your business might involve some personal financial risk; if the business fails, you are liable to pay the debts incurred. If your start-up company is low cost then registering as a sole trader is probably the best option as there is little hassle associated with it.
Some business types require a licence or permit from the local council before they are allowed to set up and begin trading so always check first before proceeding with setting up your business. There is help available should you require information regarding the legal procedures and conditions surrounding the registration of a sole trader. TheHMRC website and their helpline for the newly self-employed is a place to find good, accurate information but there are a number of different sources of information.
With similar features, advantages and disadvantages to being a sole trader, a partnership is for those people looking to offer services alongside people that they know well. They are a common extension of the sole trader business model and often include husband and wife teams or two individuals who come together in order to build a business.
Partnerships offer flexibility and when it comes to decision making and administrative tasks there are two heads and pairs of hands to cover everything. Also, if one person is either ill or away on holiday the business can still continue without too much undue stress and strain.
The only legal requirement of a partnership is the same as a sole trader business, except that both individuals must be registered as self-employed and must fill out a separate tax return. Agreements have to be made regarding the splitting of liabilities, ownership and profits and also the eventualities should one partner decide to leave the agreement. In a partnership you are liable for any debts incurred by any partner so it is good to be sure of whom you go into a professional partnership with.
Benefits of Being a Sole Trader or in a Partnership
Setting up as a sole trader or as part of a partnership is quick and easy; involving no cost. All you have to do isregister with HM Revenue & Customs as soon as possible in order to ensure you only pay the right amount of tax and don’t get fined.
You have sole decision making powers and have complete vision over where the company will go. Either as an individual or as part of a two person team this can be really freeing and offers you the chance to sculpt your own future in a way that working as part of or owning a larger company might not allow.
Disadvantages of Being a Sole Trader or in a Partnership
There are disadvantages to being a sole trader that you can overcome. Having sole decision making powers can bring a lot of pressure as does having to deal with all aspects of your administration (filing, invoicing, ordering materials, engaging with customers etc.), finances (ensuring you pay the right level of tax and national insurance for each financial year – and if you employ people as a sole trader business, paying the right amount of tax and national insurance for your employees as well).
These are all concerns that can be effectively dealt with and there is assistance for them all, in the shape of accountancy firms, business start-up advice services, an answering service or personal assistant; maybe even a virtual office to help you handle the administrative side of your business affairs.
It is essential that you don’t put yourself under unnecessary stress, so look for help and build a structure and support network around you that will help your new business thrive for not just the short term, but with a longer term outlook.
Going it Alone or in a Pair – An Exciting Venture
If you’ve made the decision to start your company as either a sole trader or as a partnership there are exciting times ahead for you.
Bear in mind that there is a lot of help that can be found to ensure you have a fulfilling start-up business experience and can lay solid foundations for a bright future. From personal assistants, virtual office to telephone answering services, find the right solutions that allow you to focus on your product and service.