ADVANTAGES OF OPERATING AS A SOLE TRADER
Setting up a new business requires quite a few decisions. First, you must determine if you are going to incorporate your business or operate as a sole trader. Sole trader businesses are the most popular means of starting up in the UK. Understanding the advantages of this legal entity could help you to make up your mind about which business formation you should choose.
Sole traders have complete control of their businesses. This means that you do not have to collaborate with anyone else in any of the business decisions that you make. This alone could be a good reason for choosing this type of business formation.
Sole traders are also generally closer to their customers. You have the opportunity to develop a more personal relationship, which is important to many consumers. Customers who are looking for personal services may prefer those of a sole trader over a limited company because they will feel that they will receive a much more personalised approach to those services.
Sole trader businesses are much easier to get started than limited companies. While setting up a limited company is not difficult, it does take more time and can cost more in the long run than a sole trader business. If you are operating as a sole trader, you do not have to register your company with Companies House and there are no official forms that you need to complete. You do need to inform HMR that you are going to be self employed and that you will be operating as a sole trader, however.
The costs associated with forming a sole trader business are also much lower than those of a limited company. You do not have fees to pay to Companies House and depending on the nature of your business, you may be able to set it up without any money out of pocket.
Sole trader businesses have fewer regulations and legal requirements to meet, as well. There are fewer statutory filing responsibilities, which means less paperwork for you. This also means that you will have less contact with regulatory bodies and you are not required to maintain registers like that of a limited company.
Sole traders enjoy much more privacy as well. A limited company must provide accounts that can be inspected by the public. A sole trader can keep his or her financial information completely private so your competitors will not be able to see how much money you are earning or learn any of the secrets to operating your business. Your personal details will also remain private.
As a limited company, you are required to publish details about your company, including the names and addresses of your directors. As a sole trader, no such information is required so you are free to operate your company without any inspection from outside sources. There are of course, disadvantages to operating as a sole trader as opposed to a limited company. Understanding all of the advantages and disadvantages is important in making your overall decision on how your company should be formed.
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