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An Essential Guide For Setting Up Your Own Business
Self-employed sole traders make up 15% of the UK workforce which is upwards of 5 million people – a number that is steadily increasing due to the uncertain economic climate we all now face due to Covid-19. Going out on your own can be a daunting prospect, but there are many benefits to working for yourself. Here is our guide to becoming a sole trader, including steps you can take now to mitigate the economic consequences of the Coronavirus.
The outbreak of the Coronavirus has had a significant impact on businesses of all sizes and in all industries and will continue to do so in the months ahead. Many people now find themselves without work, thus leading to an increase in people exploring self-employment.
Why Become a Sole Trader?
Setting up as self-employed can offer a number of benefits, and not just financial. You can pursue your passions, hone your skills, and make money on your own terms. Becoming a sole trader is also the simplest way to start a business. So if you are an enterprising individual with a promising business plan, now could be a perfect time to take the leap.
What Do I Need to Know?
Before starting a business it is important that you weigh up the risks. There are many benefits to self-employment including the flexibility to work when and where you want, being your own boss and charging clients what you like. However, with that comes the fact that sole traders are not entitled to the same benefits of employed workers e.g sick pay or paid holidays.
In the current economic climate, sole traders may therefore lose income as companies cut back on using freelance work. Fortunately, the government is in the process of introducing measures to support independent traders and small businesses through a £350 Billion economic rescue package. If you are or have recently become self-employed, you can now seek out Universal Credit or Employment and Support Allowance.
Now that you have weighed up the risks and benefits, setting up shop should be a breeze. Once you have registered as self-employed with HMRC, the next step is to choose a name (exciting!). It can be your own, or any name that’s not already used by another business. If the goal is to grow your business, you may also want to establish your chosen name as trademark.
This will be the name you trade under, so make sure it is suitable and reflects the service you provide.
Fail to Prepare, Prepare to Fail
Next, you should develop a business plan and cash flow forecast. You need to ensure that you will earn enough to cover expenses and taxes while paying yourself a wage. Remember you have no limited liability and your own assets are at risk should the business fail.
Part of your business plan should be understanding what taxes you will have to pay, and when you will have to pay them. As a sole trader, you will at minimum need to save for National Insurance and Income Tax on any profits you make. Depending on the type of business you plan to run, you may also need to pay business rates, employee tax and VAT payments. For further guidance check the government’s website.
As a sole trader, you will have to complete a self-assessment tax return each year. This will detail your income/expenses and be used to calculate how much tax you owe. For this reason, it is important from the offset that you keep all of your financial records. Store all of your receipts, transactions and paperwork in one place that you can consolidate once it is time to file your tax return.
Lastly, once you start trading (some types of work will require a licence or permit before you can begin operations) it is vital that you set in place terms and conditions for your customers or clients. Set clear guidelines on rates and invoices, to ensure you are paid the right amount and on time. Properly managing your finances is an essential part of being a sole trader, particularly in times of economic uncertainty.
Get Yourself Out There
So you have your name, your business is set up, and you’re ready to start working. The question remains, how do you get any customers?! Marketing is answer, where diligent and creative advertising can help you stand out from the crowd and establish your own corner of the market.
Keeping customers is the easy part if you’re good at your job, but getting them in the first place is the issue – well, an issue unless you have the Red team behind you! From social media advertising to printed materials, and websites, we have effective services for all budgets and every stage of your business growth.
Setting up your own business takes tenacity and hardwork. For ambitious individuals the benefits far outweigh the risks. All it takes to succeed is a brilliant business plan and proper marketing. If you want a digital marketing partner that can help you stand out in noisy competitive business environments with clever, bold marketing and design, get in touch today. We have the skills and insights to enhance your brand in line with your ambitions.