Sole Trader

ozzy

Junior member
16 0
Hi,

Can anyone out there give me some sound advice on becoming a sole trader( I'm not talking financial trader here, just say for instance a consultant to the food industry as an example)? How easy/difficult is it? How do I go about choosing a company name if I don't want to use my own personal name? Do I have to register with anyone and how quick can I start trading, I need to set this up really quickly so any help would be really appreciated. If any one is a sole trader out there perhaps they wouldn't mind giving me some suggestions and help. You can post or private email me.

Cheers,

Ozzy
 

JonnyT

Senior member
2,560 22
Ho Ozzy,

1) Its easy, just inform the IR.
2) You do not have a Company Name as you are not a Company. You can however have a trading name...
3) You can start straight away.
4) You need to consider NI and whether short term you can get exemptions.
5) You may need to consider registering for VAT.
6) Why trade as a Sole Trader? The way NI now works, for most people trading as a Limited Company has financial benefits.
7) Do not pass any Sole Trader money through personal bank accounts(just one payment cheque per month ideally). I did this and had a full enquiry into my affairs. This involved a written explaination of every transaction into and out of every bank account I held (five) over £10. Bloody nightmare. In the end they paid me £400 odd quid back as I'd got my sums slightly wrong!!!

My advice, seek advice but trading as a Limited Company is likely to have benefits, even more so of you are married and issue shares in joint names(can escape NI, and higher rate TAX effective tax rate 19%).

JonnyT
 

ozzy

Junior member
16 0
Hi JonnyT

Thanks for your comments, I thought a lot more is involved with setting up a Ltd co., and, as I am dipping my toe in this venture so to speak, I thought becoming a sole trader for starters was the best route. I could always register later on if it all took off. Can I have any trading name I want as a sole trader?

Cheers

Ozzy
 

fowkesp

Active member
129 0
Ozzy,

Agree with what JonnyT tells you, but be careful about splitting shares with wife/partner if you set up a Ltd Co. The Revenue can view this as tax avoidance under the S660 settlement rules. They didn't used to bother about S660, but they have started to enforce it recently (as a scare tactic, I believe).

See http://www.inlandrevenue.gov.uk/taxes_act_2002/vol_02/ictapt15/ictapt15.htm#TopOfPage if you want to be baffled.

It basically says that any money received by a shareholder in a Ltd Co can, under certain curcumstances, be considered to be the income of the person who earned the money for the company.

Paul
 

Skimbleshanks

1
2,325 16
It's also reasonably easy to set up a Limited company - any accountant will do it for you or you can do it yourself. There are company formation agents who set up shell companies (name, registration, memorandum and articles, etc), and they then provide you with a list of the names they have and you can buy them as an off-the-shelf company for about £100 I believe.

Once you have the company you can then change its name (a small fee and a form to be completed), as long as the name is not already in use, and there are limitations (no Royal in the name, etc).

The hardest part is coming up with an appropriate company name - just use the search facility at www.companieshouse.co.uk to check if the name is already in use.

It's really good to get an accountant asap - he/she will let you know what purchases you can claim before the company was set up, but just keep any and all receipts to do with your work in case.
 

ozzy

Junior member
16 0
Thanks for your comments all, I think I might go the Ltd. co. route, it dosen't look as complicated as I thought it might be.

Cheers

Ozzy
 

JonnyT

Senior member
2,560 22
<i>It basically says that any money received by a shareholder in a Ltd Co can, under certain curcumstances, be considered to be the income of the person who earned the money for the company.
</i>

Unless the shares are held in joint names (i.e two names on the share certificate). Dividends can then only be split 50:50 and the Inland Revenue are unable to use the Settlement Laws. This is documented on www.accountingweb.co.uk

JonnyT
 
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fowkesp

Active member
129 0
JonnyT,

Agreed. I have to keep up with this because I have been running my own Ltd Co for twenty years now. Accountants' standard advice was (and it seems, still is, in a lot of cases), to split shareholdings between hubby/wifey to achieve tax-efficient distribution of funds via dividend. The IR did not widely challenge this and many family-run companies use this set-up. Now that S660 is being enforced more widely, the standard accountants' advice needs to change along the lines you mention.

Luckily, it doesn't apply to me as I have always owned 99% of shares in MyCo; some unlucky people though are getting back-dated demands for £30K+. Phew.

Paul
 

Uncle

Established member
671 2
I couldnt disagree with any of the above posts........however before you do anything, if you havent got one already, consult a Accountant recognised by one of the two main professional bodies i.e. a Chartered or Certified Accountant.
 
 
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