sole trader suitable?

[davidmc1]

Hi folks, I'm new to the forum. Any advice or opinions sincerely appreciated.

I'm about to start a business myself in website advertising after having been an employee in this field for many years.
Initially, the business will comprise two websites. I'll make my revenue from advertising fees charged to organisations internationally (such as schools and universities).
I was considering starting a ltd company but after further research I think a sole trader may be the best route.
I will have no employees (although I'll use the service of a freelance translator or freelance web designer sometimes).
If I take the sole trader route, using a trading name (like a company name) and perhaps have a registered trademark will it be sufficient....my payments will be processed through a business account (not online on the website itself) and I'm just concerned that when I invoice a client, as a big organisation such as a university, they may want to see that I'm a company (e.g. they may want my company registration number, VAT number before adding me as a new supplier, etc....)
I could take the route of starting a ltd company as sole director and shareholder but as this business will be my only source of income, I'm a bit concerned that paying myself a salary through the company may be more restrictive than as a sole trader......

Any comments, advice or opinions very welcome.

 

[davidmc1]

One thing to add to my above post......I won't be using many services where I pay VAT but will have clients who may be liable to pay VAT in UK/Ireland who are paying for their advertising (other clients will be from US and Australia), in the first two years my projected turnover is below the VAT threshold. As a sole trader, should I voluntarily register for VAT anyway....as the clients will be large organisations such as universities.....would having a VAT reg number on my docmunets give more kudos...peace of mind to clients...?

 

[SetupaCompany]

Firstly - are there any specific reasons you have decided a sole trader is better for your than a limited company? Have you discussed this with an accountant?

There are a number of benefits to being a limited company when it comes to tax as well as the professionalism you mention and so it may be worth looking at again.

Just remember that as a sole trader you pay your income tax on all profits you make whereas with a limited company you pay corporation tax on your business profits and income tax on what you withdraw as a salary/dividend. For most people this means a limited company is immediately a better option as you can save money on tax and take advantage of a number of other benefits you cannot easily do as a sole trader.

In terms of VAT, yes if you feel it will make a difference to your clients then voluntary registration may be the way to go (regardless of whether you are a sole trader or limited company) if you don't mind the extra paperwork it creates.

In terms of the company name, even if you trademark the name it will not stop someone registering it themselves with Companies House. If you decide to go sole trader route and want to protect the company name for possible future use then you should register the company anyway and leave it as a dormant company.

 

[davidmc1]

Thanks for your reply. If I started as a sole trader, but registered a company name and left it dormant, I'm assuming I could trade under that same name as a sole trader (without using the suffix 'ltd' of course), using it as a business name, providing I also used my own name on all documentation in addition to the business name.

If I then decided to use the company name in future, I'd have to advise (Company House?) that the company was now active...Is that correct?

Also, whilst a company is dormant is there still any paperwork to take care of?

Any replies much appreciated.

 

[SetupaCompany]

Thanks for your reply. If I started as a sole trader, but registered a company name and left it dormant, I'm assuming I could trade under that same name as a sole trader (without using the suffix 'ltd' of course), using it as a business name, providing I also used my own name on all documentation in addition to the business name.

If I then decided to use the company name in future, I'd have to advise (Company House?) that the company was now active...Is that correct?

Also, whilst a company is dormant is there still any paperwork to take care of?

Any replies much appreciated.

Yep you can leave the company dormant whilst you continue as normal as a sole trader trading under that name (obviously without the 'limited' part though).

Each year you will need to do a quick annual return and file annual dormant accounts. Both are pretty straightforward for dormant companies though.

Once you start trading again you will need to notify HMRC within 3 months and just start filing full accounts with Companies House when they are next due.

We have a short article answering the main questions on our site here: http://www.setupacompany.co.uk/what-is-a-dormant-company

And Chapter 8 of this Companies House document covers dormant companies: http://www.companieshouse.gov.uk/about/pdf/gp2.pdf

When you need to notify HMRC you can do so here: http://www.hmrc.gov.uk/ct/getting-started/trading.htm#4


Just to be clear as well, all that registering a company name will do is prevent someone else being able to register and trade with that or a very similar name. If you want full trademark protection you would need to register the trademark separately too.

 

[davidmc1]

Thanks so much for your reply, that's very useful.

One thing I'd just like to clarify about starting up as a sole trader...

On the Gov website it states:

'You must with HMRC as soon as you can after starting your business.'

It then goes on to say:

'Register by 5 October 2013 to send a 2012 to 2013 tax return.'

So, am I correct in assuming if I started trading as a sole trader in September 2013, I could register for self assessment any time after that right up until Oct 5th 2014 (for the 21034-14 year)?

Is there any difference/benefit in registering earlier rather than later (apart from the fact that obviously if you leave it too late it will be more of a rush to then send in your tax returns)?

Any replies much appreciated.

 

[SetupaCompany]

Thanks so much for your reply, that's very useful.

One thing I'd just like to clarify about starting up as a sole trader...

On the Gov website it states:

'You must with HMRC as soon as you can after starting your business.'

It then goes on to say:

'Register by 5 October 2013 to send a 2012 to 2013 tax return.'

So, am I correct in assuming if I started trading as a sole trader in September 2013, I could register for self assessment any time after that right up until Oct 5th 2014 (for the 21034-14 year)?

Is there any difference/benefit in registering earlier rather than later (apart from the fact that obviously if you leave it too late it will be more of a rush to then send in your tax returns)?

Any replies much appreciated.

It's best to register as a sole trader as soon as possible as you can get fined for delaying it too long I believe. Registering is very quick and simple so no real reason to put it off.

 

[Adauxi]

Ltd or sole trader is a cost benefit analysis but also about risk - with a ltd coy you can cap your exposure to things going wrong, whereas you can't as a ST. For a ST you'll still need accounts (to calculate taxable income) and as per a previous post you'll be taxed at marginal rates on all earnings (with a ltd you can cap it at 20% provided you don't withdraw more than the basic rate threshold).

One other thing to remember apart from trade mark is domain names - anyone can pick these up cheaply if you don't.