UK Sole Entrepreneurship
Who is suitable for this and what skills are required?
What is it?
It’s worth understanding initially what it is, who it suits, and what the benefits of owning such a business are. A sole proprietorship is a type of business in which the owner may be a single person, or may rule a corporation with his or her family. Owners of this type of business are both owners and active managers.
The point of such an enterprise is that the entire firm is the property of one owner, who runs his business independently, and accordingly makes all the profits, while being personally fully responsible for all the obligations of his corporation.
The disadvantages and advantages of such ownership?
Every enterprise in one way or another has its disadvantages, as much as one might want it to, but at the same time all the advantages are sometimes much more, which are very much needed by certain entrepreneurs, or rather their business.
Of the disadvantages we can note the following:
- Banks will not be in much of a hurry to issue you a loan, as it is difficult for one entrepreneur to pay back the debt. This is not due to the fact that banks consider your particular business to be unproductive or bankrupt in the future, so you should not pay attention to this. This problem is due to the fact that a lot of sole proprietorships more often than not are unable to pay debts, so banks are reluctant to give loans. But the most important thing is that you can get a loan! So if you are more than confident in your business, go for it!
- The second disadvantage of sole proprietorship of a business is that the entrepreneur will pay the debts himself, which is logical in itself. The more unpleasant thing about this is that in case of bankruptcy, debts to creditors are also paid with personal assets. So if the company goes bankrupt, in order to pay the debt, the creditors can write it off, your house, apartment, car, etc.
- The third disadvantage is that the company may not have special management, because everything is managed by the owner, so we can say that if you do not have enough skills in this business, you may at first be difficult. But from this we can conclude that if you are a skilled enough manager, it is only to your advantage.
Despite the above disadvantages, you should like the advantages:
- The first advantage is that all of the appropriated profits are yours alone, but don’t forget about paying taxes
- Having a personal company where only you are in charge, you have a very big incentive to work, so if you want to be successful, procrastination is your worst enemy
- The costs of organizing production will be negligible compared to the amount of income that will come in.
- Very large degree of freedom of economic choice
- A simple taxation system, the company is only subject to income tax, which is much less than the corporate income tax
- And of course the independence and freedom of choice what to do with the company, so you do not have to go to the board of directors or try to get the consent of the partners to make a decision on some changes
- Сonfidentiality. The secrets, plans and everything else about your business only you know, which is very useful because in this way your competitors will not be able to make a very similar product to yours, and add more innovations that will make your product less attractive to the consumer
- These businesses are easy to set up and in turn liquidate because there is no government involvement, which is why this is becoming popular with small business owners
- It is possible that with very good growth of company assets and its popularity, you decide to expand, in which case you would have to form another kind of company
So you can see for yourself that there are twice as many advantages. A sole proprietorship in terms of its business structure is the easiest type of business introduction, both in the UK and under the laws of this state. The company itself will be an individual who owns the business and at the same time makes a profit from it. To open a business, its owner must register with the tax and customs service, as a sole trader in order to be a legal taxpayer and the object of national insurance in the future. It is worth noting that the owner has the responsibility of keeping records and filing an annual tax return.
The company makes a profit only after taxes are paid. If the income is more than £85,000 per year, the company must be registered for value added tax. If the owner hires employees, he is responsible for losses and staff
What do you need for such a business?
First and foremost you will need:
- A National Insurance (NI) number.
- To register with HM Revenue and Customs (HMRC)
- Think up a company name or trade under your own name
But you also need to remember the basics of building a business, not just registering a business. The following steps are essential to building your future sole proprietorship:
- Business idea and drawing up a business plan (so to speak, without a strategy in such an environment as a business, it is better not to enter, because the competition is very big and you need to be prepared for active competition, and in this you will help only clearly structured actions, implementation of which will take your business to the top)
- Deciding on a name for your business (this name should be chosen so that it primarily describes the activities of the company to sound good, as well as interested in the future consumers of your organization)
- Registering with HMRC (as already mentioned)
- Open a business bank account (of course the company must have an account where the money will go, after some of that money is paid as tax)
- If necessary, filing registration or applying for business permits and licenses (if you want a business that falls under this framework)
It’s also worth mentioning that a sole proprietor can have more than one type of status (there are several options, but there can only be one status):
- He or she is not a separate legal entity from the business owner.
- The business owner has unlimited liability (thus, the business owner is personally liable for all debts and losses of his business).
- He can sue or become a defendant on behalf of the owner.
So, although sole proprietorship has some disadvantages, there are still twice as many advantages. This type is suitable for people who have excellent management qualities, as well as very good strategic ideas about the business and its development. So, if a person wants to have such a business, they need to be prepared to pay taxes and promote their campaign incredibly well. But if this is the kind of business ownership that you have in mind, you at least need to be very knowledgeable about all the laws and their loopholes, business strategies, and the like.