Are you thinking of going into business for yourself? Tired of using your time, skills and effort only to make money for other people? Want to be your own boss? Or perhaps you are just an entrepreneur by nature? But, whatever your motive, there are two ways that you can go into business for yourself. You can choose to be an incorporated trader or an unincorporated trader.
If you choose to be an incorporated trader that means that you will need to form a limited company and use that as your trading vehicle. Your trading name (or business name) would be the name of the company and your letterheads and invoices will need to reflect that. The alternative is to launch your business as an unincorporated trader, otherwise known as a sole trader.
A sole trader conducts business under his or her own name which also appears on the invoices and letterheads of the business (and the website). A sole trader can legally do everything that a company does in terms of business, which is to say everything from making contracts to hiring employees.
If you have decided to start your business as a sole trader then you’re probably working your way through a long checklist of things you need to do but one of the easiest is to open a sole trader bank account. You would be wise to do this as soon as possible because while there is nothing legally to stop you using your own personal account for payments and receipts, it is vitally important as a sole trader to keep constantly on top of your business finances. Having a separate sole trader account is the ideal way to do this as you can easily check and keep track of things like receipts and expenses. In turn this makes it a lot easier to prepare your annual accounts and file your tax returns.
Opening a sole trade account is a lot easier than you might think and, these days, you can usually do it online. You just need to fill in a few simple forms, verify your identity and address and away you go. Some banks do insist on a credit check too so try to find one that doesn’t if you think that may cause an issue.
The other thing you must do as a sole trader is to register for self-assessment tax.
There are some people who prefer to incorporate, chiefly because the principle of limited liability is appealing to them. But the downside of incorporating is that it costs money to form a and keep a company and you also have to file annual accounts with the Companies House. The register of companies is public so that means anyone can find out online how much your business is earning. A sole trader does not have to worry about the administration and extra form-filling and their business finances are entirely private. If, as a sole trader, you are concerned about any potential liability, then you should consider investing in a public liability insurance policy. This is something else that can also be obtained online and is seldom expensive.