How to Set Up Your Business as a Sole Trader

If you are a one-person business, perhaps working from home, probably the best method of trading is as a sole trader. You do not need to register with any official body, but you do need some stationery with your name and business address. You should also have a document displayed in your office showing the name and address of your business and its proprietor(s). You need to inform HM Revenue & Customs and the Department of Work and Pensions (DWP) that you are self-employed and if your turnover (that is, the amount of money you actually take in sales in a financial year) is £60,000 or more (2006 figures) you need to be VAT registered. This figure may change each year. It is surprising how quickly your turnover will reach this figure.

If you are trading under your own name – for instance, ‘John Robinson Associates’, or ‘J. Robinson’ or something very similar – you do not need to check whether someone else is trading under the same name. If you choose to trade under a name which is quite different from yours (for example, ‘Parisian Photos’), check with your solicitor that there are no legal objections to your doing so. Your own name and address must still appear on your stationery.

Sole Trader Business

As a sole trader you are personally responsible for all your business transactions. This means that your personal income, from whatever source, your house, your car and even your estate after your death can be used to pay off debts. Some people make sure that the house is at least in joint names and that other possessions (such as the car) are registered in the name of another member of the family. Check with your solicitor the best way of covering yourself. You do not have to have your accounts audited, but it is as well to employ an accountant who specializes in very small businesses to prepare your annual accounts and tax returns for HM Revenue & Customs purposes.

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About the Author: Marie Mayle is a contributor to the MegaHowTo team, writer, and entrepreneur based in California USA. She holds a degree in Business Administration. She loves to write about business and finance issues and how to tackle them.

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