8 Benefits of Working as a Sole Trader

You've come to the right site if you want to learn how to launch a lone Accounting firm. On this page, we'll go through the fundamentals of running your own incorporated business, from the definition of a sole trader to the benefits, considerations, and tax implications of doing so.

Definition of a sole trader

A sole trader is a self-employed individual who owns their whole business and is not legally separated from it. Unlike persons who work through their own limited company, which is legally separate from its owners, it's commonly claimed that you are the business as a single trader. Working as a single trader is quite popular in the UK, with 3.5 million people doing so. It has a lot of benefits.

1: Complete control and flexibility

You have complete control over all areas of your organisation, from day-to-day operations to long-term goals and strategic direction.

You won't need to contact shareholders, directors, or partners, as you would with other corporate arrangements. You can make independent decisions, act quickly on them, and remain adaptive and attentive to your clients' needs and changes in the business landscape.

2: It's simple to set up.

It's simple to start a business as a lone trader. All you have to do now is tell HMRC that you're self-employed (by registering for Self Assessment online) and pick a business name.

Unless you're running a form of business that requires a license to operate legally, you'll be allowed to start trading straight away. If you're not sure which licenses you'll need, use HMRC's license finder tool to find out.

3: Low start-up expenses

You don't have to register with Companies House as a sole trader, and you won't have to pay any additional expenses as a result (registering as self-employed with HMRC is free).

There's no need to hire a company formation agency or a lawyer to start a business, thus the costs are cheap.

4: lower accounting fees

Sole traders are subject to fewer reporting obligations and deadlines. There is less accounting work to do, resulting in lower accounting fees.

5: More personal space

Your accounts, as well as detailed facts about the company's directors, are made publicly accessible through the Companies House website if you run a limited company.

Sole traders, on the other hand, are covered by HMRC's taxpayer confidentiality requirements. Your personal and financial information is kept confidential.

This not only gives you more privacy, but it also gives you a competitive advantage by making it more difficult for competitors to obtain information about your company.

6: Profit ownership

You don't have any partners or stockholders to pay or split profits with as a single trader, therefore you have complete control over the company's profits.

7: There are fewer legal obligations.

You must file a confirmation statement, corporate tax return, yearly accounts, and other event-based filings to Companies House as a limited company director.

When you work as a sole trader, you won't have to worry about these things, which means you'll have a lot less paperwork and administrative responsibilities to deal with.

8: It's less difficult to change your company's structure in the future.

Starting up as a sole trader is significantly easier than forming a limited company from the beginning. That's because, as a limited company director, you'd have to dissolve your company and step down as a director if you wanted to modify the structure of your firm.

Converting your single trader business to a limited company is a much simpler process. You can get authorised in as little as three working days by filing an online application to Companies House.

More details can be found in our article on forming a limited corporation, which includes step-by-step directions for getting started and finishing the process.