How to register a sole trader business in the United Kingdom

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The United Kingdom, commonly known as Great Britain, holds a global reputation as a prominent hub for finance, industry, and commerce.

Renowned as one of the top ten nations worldwide for business-friendly policies and regulations, initiating a venture in this esteemed location is considered prestigious, straightforward, lucrative, and relatively affordable. 

The British government actively fosters and supports small-scale enterprises, striving to create a conducive environment for thriving entrepreneurship.

Embarking on your entrepreneurial journey in Great Britain is tantamount to securing a promising future for yourself. As for today, we want to tell you in detail how to register a sole trader business in the UK.

Who is a sole trader in the UK?

Registering as a sole trader is widely recognized as the most common and straightforward method of commencing a business in the United Kingdom (UK).

This form of registration is particularly well-suited for small-scale enterprises with modest turnover and a single owner.

However, in instances where businesses are larger or have multiple owners, entrepreneurs often opt for alternative legal structures, such as limited companies or other business forms.

Similar to the concept of individual entrepreneurship in Russia, an individual entrepreneur in the UK is not considered a distinct legal entity. Rather, it refers to a natural person who conducts business operations under their name.

How to register a sole trader business?

An individual entrepreneur only needs to notify the tax authority that he plans to start work. They will also need to state whether he will be acting in their name or whether he wants to use a business name. 

This information is required in order to keep track of tax revenues. No checks are made as to whether other entrepreneurs are already using the business name.

However, if you use someone else’s name, you may be sued for changing it after a while. You will also have to defend your name in court.

That is, several entrepreneurs can use the same name as long as none of them object. For limited liability companies in Great Britain, there is a requirement for the uniqueness of the name. 

Therefore, entrepreneurs often resort to this trick: they register a dormant company, thereby protecting their name, because, after registration, no other company will have the right to use this name.

Yes, an individual entrepreneur can use it, but will most likely refrain from doing so.

As the Hoxton Mix explains, the only proof of registration as a sole proprietorship is a Unique Tax Reference (UTR) number.

There are no certificates, certificates, or other documents confirming the status of the entrepreneur.

Moreover, there is no public registry of individual entrepreneurs in the UK where anyone could check the registration of the seller or the correctness of the UTR.

In the UK, there are a number of private registries of entrepreneurs, but registration in them is voluntary.

Liability and taxes

Since the individual entrepreneur is a natural person who is liable as a natural person. This is one of the significant disadvantages of this legal form.

For example, in the case of litigation with a limited liability company, the legal entity, not its director/shareholder, will be fined. If an entrepreneur encounters financial difficulties, their assets are also subject to recovery.

An entrepreneur may run a business as soon as he/she has applied with the tax office (moreover, it is sometimes possible to start a business first, but within three months, he/she must notify the state authority about it).

At the same time, a sole trader must keep strict financial records, as all self-employed persons are obliged to fill in a tax return every year.

The entrepreneur must pay 20% of the profits (there are nuances), as well as make contributions to the state insurance system.

Main benefits of running a business in the UK

First of all, as Hoxton Mix recommends, let’s find out the most obvious pluses of opening and registering a business in the UK.

So, have a precise look at them:

• Robust economic development: The UK boasts a high level of economic development, offering ample opportunities for business growth and prosperity.

• Political and social stability: The UK is known for its stable political and social environment, providing a conducive setting for businesses to operate with confidence and stability.

• Progressive income tax system: The UK has a progressive income tax system, which means that as your business grows, you may benefit from a fair and balanced tax structure.

• Low-interest rates on loans: Businesses in the UK can take advantage of low-interest rates on loans, allowing for cost-effective financing options to support business operations and expansion.

• Affordable services: The UK offers a wide range of cost-effective services, including business services, utilities, and infrastructure, making it a cost-efficient location for businesses to operate.

• Asset security and risk minimization: The UK has a robust legal system offering asset security and risk minimization measures, providing businesses with security and protection.

• Stable and thoughtful legislation: The UK has stable and well-thought-out legislation, offering businesses a predictable regulatory environment that fosters confidence and stability.

• No double taxation: The UK has a favorable tax treaty network, which minimizes the risk of double taxation for businesses that operate internationally.

• Prestigious jurisdiction: The UK is recognized as a prestigious jurisdiction that can enhance the reputation and credibility of businesses operating within its borders.

• Developed banking system: The UK has a well-developed and sophisticated banking system, providing businesses with efficient banking services and financial support.

• Established trade relations: The UK has established trade relations with Europe and the United States, providing businesses with access to key financial markets and international trade opportunities.

• Prospects of acquiring an English residence permit: Establishing a business in the UK may offer the opportunity to obtain an English residence permit, providing potential immigration benefits for business owners and their families.

Conclusion

The UK government proactively nurtures and facilitates the growth of small businesses, aiming to cultivate a favorable ecosystem for successful entrepreneurship.

Initiating your entrepreneurial endeavors in Great Britain is akin to laying the foundation for a bright and prosperous future.

As for this article, we have done our best to explain to you how to register a sole trader business. Hopefully, you have found this copy useful. Thank you for your attention.

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Disclosure: This is a sponsored post. However, our opinions, reviews, and other editorial content are not influenced by the sponsorship and remain objective.