Some of the advantages of registering as a Sole Trader include:
You can get started quickly
It is easy to set up and you can be trading within a relatively short period of time. You will usually be able to register online and the business number is free, so there are no significant costs involved. Once you have decided on a name for your new venture, you just need to make sure that it is not already in use. Once your business has been launched, work can begin on marketing and promotion using social media such as LinkedIn and Facebook, traditional methods (such as leaflets), or an online promotion campaign via Google Adwords or Google Display Network.
You manage everything
As a Sole Trader, you have total responsibility for the running of your business. You will have to promote it, get it set up and running, build up your client base and manage dealings with banks and other financial institutions.
You can work from home
As a Sole Trader, you can decide to run your business from home rather than renting out commercial premises. It is important to note that if you choose to trade from home, you are not allowed to use more than one room as an office; the rest of the space must be used as a living area. The definition of a living area is quite broad and includes anything that is usually regarded as part of a private house. For example, if your kitchen/dining room/sitting room is on ground floor level in front of or adjoining an entrance door into the house then this would be regarded as ‘living accommodation’. Working from home means that as a sole trader you can also claim tax relief for ‘Use of Home as and Office’.
Disadvantages of a Sole Trader
All the responsibility
As a Sole Trader, you have total responsibility for running your own business. You have to promote it and get it started, build up your client base and manage dealings with banks and other financial institutions. All of this is hard work and can be very stressful at times. It is not the best choice if you prefer to delegate tasks to others or just want someone to do the hard work for you!
As a Sole Trader, you are responsible for all costs. This means that for most people starting out on their own as a Sole Trader, there will be extra costs involved because they need to buy equipment such as a computer and car or van (regardless of whether these are used solely for business use). There may also be costs incurred from having to advertise your services (including transport/postage costs). All of these things can add up quickly and create high overheads. This can make it difficult when you first start out as a sole trader and you may find it hard to have money left over at the end of the month to put away in case of any unforeseen problems.
No extra support
As a Sole Trader, you will be entirely responsible for your business. This means that if something goes wrong and you need help from someone else, there is no company or person anyone to turn to for advice or support. You are also unlikely to get any financial support (such as interest-free loans) from banks due to the high risk involved in lending money out as a Sole Trader – most banks will expect you to have an overdraft facility instead. There may be occasions where you could use an overdraft with another bank, but this can result in paying lots of extra fees so should only be used as a last resort if there are no other options available.