Starting a business can be daunting, but unbelievably exciting and rewarding. It feels like a step towards the rest of your life, especially when little things begin to tick and go right. You’re building a money-making machine, and in order to do that right, you need to give consistent and continual diligent maintenance, while being focused on growth, and habitual functionality.
That all sounds pretty heavy, doesn’t it? Well, it really doesn’t have to be. You just need to know you’re doing it right. Research things properly, don’t be careless and you’ll be fine. As a starting point, sole trader status is an advantage. It gives you everything you need to begin growing as a business while you are getting set-up and honing your business model.
Easy, Speedy Start-Up
Not to mention cheap! Starting a business as a sole trader is very, very straightforward. It requires minimal capital and investment, and virtually anyone can define themselves as a sole trader. It’s simplicity and ease, avoiding any complications that might come from attempting to declare your business as a limited company, and allowing you to focus and develop the core focuses and elements of the business on a micro level, before even considering growth and development.
There are a million points that can trip you up when starting a new business, and a good percentage of these can be mitigated by common sense, forward planning and good research. Declaring yourself a sole trader from the beginning gives you a solid base to grow from, and is very difficult to mess up. Do yourself, and your business a favour, and go with the simple option. There’ll be difficult, interesting activities in the future of your business anyway.
Direction and Control
If you’ve ever gone into business with a friend or colleague before, only to eventually find yourself experiencing something like creative differences, and jeopardising the future of the business, purely due to personal differences, approaching the business as a sole trader could be the solution. If you’re a perfectionist it’s probably the best option. People, even experienced, knowledgeable people, who’ve read Dale Carnegie books, argue. If you yourself aren’t the most easy going, affable person already, starting out as a sole trader is the way to go.
Being able to direct and control the style, movements and functionality of your business can be a major boon. The capability to craft your business into the cash-cow steady-earner you’ve always dreamed of running rests purely in your hands. While that might seem a heavy responsibility, you know what else rests entirely in your hands? All the profits, glory and pride of single-handedly building a successful business.
Growth and Development
One of the great things about starting out as a sole trader based business, is that it’s fairly simple to become a company limited, or another legal business form, later on. Provided you’re successful enough to be justifying the jump from sole trader status, to another legal business form, you’ll have zero problems making the transition. This means that starting out as a sole trader is, in sheer terms, the best way of exploring that business idea you’ve been ticking over for years.
One shortcoming inherent in functioning as a sole trader company is funding and capital. Many banks and investment organisation dislike loaning to sole trader businesses, for reasons like liability and how easy it is to obtain sole trader status. Anyone can do it, so it doesn’t count for much with the banks. Provided your business is solid, and you can sell it properly, you shouldn’t struggle too much.
However, especially in terms of loans and investment, beware. As a sole trader, there’s little to no separation between you and the business. You are the business, and as such you assume full liability for future debts should the business tank. This includes repaying them with your assets. Being unlucky with your sole trader business can land you in a whole lot of trouble, debt and bankruptcy.
Another slight downside to functioning as a sole trader business is the lack of tax benefits. Depending entirely on where you live, obviously. The norm, however, is that sole traders are subject to higher levels of taxation on profits and income than limited companies. This shouldn’t be too much of an issue though. Once you’re making enough for that taxation to be really bothering you, you can simply change the status of your business to a limited company, with much lower levels of corporate tax.
We’d like to thank Informi for this insight.