How to become a Sole Trader

The option of setting up your own business and becoming an independent sole trader is a becoming an increasingly popular option mainly because of the easy start up procedures and the obvious appeals of being your own boss! Although relatively straight forward, it is important to follow the steps involved to avoid any unnecessary financial penalties.

Step 1 – Register as self employed
The first requirement is to register with Her Majesties Revenue and Customs (HMRC) as self employed. You should register the moment you become self employed in order to avoid any penalties. If after three months of trading you have still not registered you could be fined. The form required can be found on HMRC website.

Step 2 – Get to grips with VAT and tax issues
As a sole trader you will have to pay income tax on any profits you make. Every year you will be required to fill in a self assessment tax return form. It is advised to get an accountant or book keeper who can help you with these often complex issues, including explaining National Insurance payments. You will be advised to keep a detailed record of all your expenses receipts and transaction records which will make the self assessment a much easier job.

Step 3 – Do you need any special licenses?
The majority of sole traders will not require any licenses. However, businesses such as restaurants, taxi drivers and those who work with children may require a license from the local authority. The construction industry is also subject to special tax rules so it is best to visit the HMRC website for more information on this, or seek advice from your bookkeeper.

If you follow these steps you should be up and running as a sole trader in no time. Use our quick checklist below to see how close you to becoming a sole trader –

· Have you registered as self employed with HMRC?
· Have you set up a financial records system to monitor expenses and profits?
· Have you sought professional advice?

Setting up as a sole trader is red tape and bureaucracy free in the most part. However, it is vital that you firstly register as self employed and understand the tax system and requirements. Seek professional help from a bookkeeper or accountant who can offer you expert help and advice.

How to write a business plan

In simple terms, a business plan outlines your vision for the future of your business, assessing where you are now and where you want to be in the future. By asking yourself a few questions a comprehensive plan will begin to emerge -

· What is the nature of your business?
· What is the market? Who is the target consumer and how many rivals do you have?
· How much money will you need to invest?
· What are the prospects for investors?

It is important to remember that business plan is a persuasive tool so it must make whoever is reading it (especially if you want them to invest) want to keep on reading.

If financial investment is the ultimate goal from an outside investor, make sure your financial figures are accurate and you can back them up – as Dragons Den has shown, they can be easily ripped apart by seasoned investors!

What to include
Essentially, your plan should consist of four key sections:

· A mission statement – Why does your business exist and for what purpose does it serve?
· Objectives – What are your goals and ambitions?
· Strategy - How will your business achieve its goals?
· Budget – How much will it cost to achieve these goals?

Make sure the plan is succinct and compact. Only include the key points and do not go into unnecessary details. It should be short, sharp and concise.

Key benefits of a Business plan
If you thought that a business plan is a waste of time or not necessary to become successful then think again. A business plan is a key element of any business and having a well researched plan can provide many key benefits that include:

· Convincing lenders and investors to invest capital in your business
· Provides an estimate of start up costs and how much will need to be invested
· Helps clarify targets such as where you want the business to be in a certain amount of time

A business plan can make confusion and uncertainties about your business become a lot clearer. By having a plan, you can keep on top of your objectives and allows you to see how far away or how close you are from your goals.

Small Business and the New Coalition Government – What’s in store?

With the new coalition government settling into its seats, how will your business fair in light of the proposed changes on the horizon? Many uncertainties are still lingering, so what can we expect from the new government and how will it affect the smaller business and sole trader? The best way to start is to look at what was promised prior to the election, and see what might be in store if they stick it their promises. A few Conservatives pledges included:

Cut Corporation Tax
This would be good news for businesses, as it means companies will end up paying less tax with the small business rate dropping from 22% to 20% and the standard rate from 28% to 25%.

Simplify Business Taxes
The Tories have pledged to reform the tax system for business, making it in theory a lot easier to calculate taxes and slackening red tape.

Access for SMEs to Government tenders
Under new rules, 25% of Government contracts could be awarded to small and medium enterprises to help stimulate growth and encourage recruitment.

Overall the Tories have pledged to create a new generation of small businesses. Whether this will happen remains to be seen, as the new Liberal Democrat influence may make pushing some policies through more difficult than imagined.

Make sure you keep up to speed with developments, as things could change quickly. Seek expert advice from your bookkeeper if you are unsure of any tax or VAT issues or what changing legislation and policies mean to your business.