We have just started running our second Great office Giveaway supporting new businesses that are starting out. As well as offering office space, we though it would be helpful to support them in other ways space to call home. With this in mind, we are working with all the entrants to the first giveaway to see how we can support them. We are also doing a series of blog posts that can look at the challenging issues that they face as the journey begins.
Recently, more and more people have goals of setting up their own businesses and working for themselves. Since the coronavirus pandemic this has become even more apparent. Many employees have had the time to step back and think about what it is they really want to do, the unexpected time off has pushed people to step out their comfort zones and make the leap to becoming self-employed.
According to the government, in 2018, almost 60% of British businesses were sole traders, that is about 3.4m businesses out of a total of 5.6m. Sole traders – often called the “self-employed” – drive the UK economy. A sole trader is the exclusive owner of their business.
With the return to work on the horizon, are you feeling more inclined to jump into setting up your own business too? Is there something that you have always wanted to do but have quite easily found excuses not to?
Many people don’t know where to start when setting up a business. There are two options to consider, the simplest option is becoming a sole trader, and another is setting up a limited company. Both have their own advantages and disadvantages. To make sure you aren’t overwhelmed when taking the plunge to achieving your dreams of working for yourself, take a look at our pros and cons list focussing on setting up as a sole trader.
Pros of setting up as a sole trader
Compared with limited companies, sole traders have much less paperwork to go through and the initial process of setting up the business is less complex.
Sole traders usually have a lower start-up cost as only a small amount of capital is needed to invest into the business at the beginning. Also, sole traders usually don’t have many, if any, employees, meaning the amount of money spent paying staff is low.
It’s easier for sole traders to retain full control of their business, and the proprietor can run the business without worrying about the interference of other businesses or individuals, leaving them to concentrate on their customers’ needs.
Limited company’s account details are available for anyone to find and inspect, whereas a sole trader can keep their business’s information private.
People making the leap from employment to self-employment often choose to become sole traders initially. Moving to becoming a limited company is always possible later on. However, wanting to become a sole trader after setting up as a limited company is more difficult due to there being a more formal process involved when closing a limited company.
Cons of setting up as a sole trader
By law, sole traders are not seen as separate entities from their businesses – therefore, they have unlimited liability. This means that the business’ debts and liabilities are yours, and you are liable.
With the freedom of working for yourself comes more responsibility. As a sole trader, the decisions are made by you and you alone so the success of your business lies with you.
Banks tend to not be as willing to lend money to sole traders due to it being perceived as a riskier investment than with a limited company, therefore sole traders may find it more difficult to find the funds to grow their business.
Sole Traders usually tend to end up working longer hours as they may not have employees. If they were to take time off this could effect the business in the early days of start-up therefore work-life balance can be difficult as a sole trader.
Hopefully, this gives you a bit more insight into setting up as a sole trader and helps you to make your decision. However you decide to set up your business, I think we are all aware of how vital it is to do the things that are important to us and we shouldn’t delay our dreams and goals any longer. Good luck.