Sole Traders and Partnership Businesses
A sole trader or partnership is a business ownership model where the business and the people who run the business are one entity.
‘One entity’ means the business owners get to keep all the profit the business makes, unlike a Director of a Limited Company who would need to share profits with stakeholders in the form of dividends.
Being one entity also means the business owners are personally responsible for paying off their debt. If the business doesn’t have enough money to pay its debt, the lender can legally make the owners sell their personal items to raise money. In a Limited Company, the Director would not be personally responsible for the debt unless they are proven to display gross negligence in running the business.
The normal calendar runs from January to December, but the business calender runs from 6 April to 5 April.
If you have made at least £1,000 from self-employment in a business year, you need to register the business with HMRC.
You can register online.
Owners of a sole trader or partnership are required to do the following:
- Keep a record of business expenses
- Keep accurate business records
- Pay income tax
- Pay additional class 2 or 4 national insurance, if applicable
- If your turnover is greater than £85,000, you need to register for VAT.
If you have moved to the UK to start a business, you will need to apply for a national insurance number.
How do I maximize the chance of success for my sole trader or partnership?
You should not start a business unless you have a business plan. A business plan:
- outlines the products or services you sell
- data about the demand for your products and services
- data about a gap in the market that you intend to fulfil
- analysis of your direct competitors.
A business plan will give you direction and increase your chances of securing loans and grants.
My business is struggling with debt; what can I do?
If your business is not making enough money to make debt repayments, options are available to relieve debt problems. If you have missed several repayments, you may receive a letter known as a statutory demand.