That’s how Lord Sugar started - What’s the secret of a successful small business? For 75 per cent of UK start-ups it’s going it alone. In other words operating as a sole trader. So is this solitary path the one for you? There are many advantages in working entirely for yourself. But there are a few drawbacks, too.
Some of the UK’s most famous entrepreneurs started out as sole traders – Lord Sugar sold TV aerials from the back of a van with £100 capital and Dragons’ Den’s Duncan Bannatyne sold ice-cream from a van.
In fact there are some professions which **must** be operated as sole traders or partnerships rather than limited companies, such as solicitors, and auditing accountants, and sole trading is simple and relatively free of red tape. For instance:
* You don’t need to register with anyone
* The taxman treats you as self-employed
* You are responsible for the day-to-day running of the business
* You handle the money
* Just one set of books is necessary for the taxman
To operate as a sole trader just contact HMRC and register for self-assessment – it can be done online. You need to enter your earnings every year and the tax will be calculated for you. You can use your own name or trade under a business name so long as it’s not too similar to an existing business or a registered trademark.
Some businesses start as lone traders as a way of testing the market and then become limited companies when they become more successful – as in the case of Louise Verity who began her business as a hobby, selling hand-crafted wall-art.
“I started as a sole trader and the income was very small but I grew quickly and once I reached the point where corporation tax might be more useful that income tax we decided it was worth registering as a limited company. So we have the name should we need it
My business is still at the point where I don’t have any risk – no loans or anything - but if things get much bigger I will consider separating the risk from my family by using the limited company.”
Says Julie Stewart, chair of PCG, an organisation for freelances: “For freelances looking for a simple approach, working as a sole trader is a relatively uncomplicated choice which will allow you to focus fully on the important things – getting work and delivering it to a high standard.”
## The upside of being a sole trader….
**You have full control** – no one can tell you what to do. This not only makes decision-making faster but if it goes wrong there’s no boss to threaten you with the sack!
**Improved customer service** – lone traders can offer a more personalised approach, which can result in strong relationships and loyal repeat buyers.
**Accountants often charge less** as there’s work for them to do – you’re only required to complete a profit and loss account.
## And the downside….
**Some potential clients** will only do business with individuals who operate as a limited company.
**The liability is all yours**. In law, the sole trader and the business is one. A limited company protects your personal assets such as your house, while sole traders have to pay for failure out of their own pockets and are responsible for the business’s debts.
**The pressure adds up** - the responsibility for everything is on your shoulders and there’s no one to help out.
**If you don’t work you don’t get paid**. Although you can have holidays and days off without asking anyone, it also means that the place is closed for business when you’re not there…