Sole trader: what it is and how to get started

A sole trader is a popular business structure that is simple and cost-effective for new entrepreneurs, especially if your goal is to start an online business. 

Whether your dream is to work freelance as a graphic designer or launch an online shop, becoming a sole trader is a quick way to get started. Even if all you have at the beginning is a handful of good ideas and a tight budget, you can make it work. 

In this article, we’ll guide you through the process and highlight the important rules and challenges to consider. 

What is a sole trader?

A sole trader is a business owned and operated by one person. It’s a relatively straightforward business structure that’s ideal for new entrepreneurs. As the sole owner, you are personally responsible for the business but can hire employees.  

Registering as a sole trader in the UK is free and doesn’t require any start-up capital. 

What’s the difference between a sole trader and a limited company? 

A limited company is also a business structure where you can operate as the owner, but it differs significantly from a sole trader. The key difference is that a sole trader is personally liable for the business’s debts, while a limited company is a separate legal entity, offering limited liability protection.  

Sole traders are typically suited to smaller-scale businesses or freelance work, while a limited company may be a better option if you expect significant turnover or wish to limit your personal liability. 

Examples of sole trader businesses 

Du har mange muligheder, hvis du overvejer at starte en enkeltmandsvirksomhed. There are many possibilities if you’re considering becoming a sole trader since the business model is flexible and allows you to be creative with your business idea. 

Here are a few examples of sole trader businesses that are easy to start:   

• Virtual assistant: Create a website where you offer administrative services for small businesses or influencers.   
• Online yoga classes: Set up a digital yoga studio and sell online courses via your website.   
• Eco-friendly pet supplies: Launch an online shop selling everything from cosy winter coats for dogs to stylish cat beds.   
• Freelance writer or designer: Work for yourself and sell your creative services to small businesses. Showcase your work in an online portfolio.   

These are just a handful of examples of businesses you can run as a sole trader – there are many more. The key is ensuring you meet the necessary requirements and are aware of potential challenges.  

Let’s now take a closer look at these challenges before moving on to how to register as a sole trader. 

Pros and cons of becoming a sole trader 

Like anything else, there are both advantages and disadvantages to choosing a sole trader business structure. Let’s explore them:   

Pros 

• Easy to get started: You can quickly register as a sole trader with HMRC.   
• You’re in control: As the sole owner, you make all decisions about the business’s operations and concept.   
• No need for start-up capital: There’s no cost to register as a sole trader. 

Cons 

• Personal liability: You are personally liable for any business debts.   
• No co-owners: You cannot add other owners to the business.   
• Accounting challenges: It can be difficult to separate personal and business finances. 

How to register as a sole trader 

First steps

If you want to operate as a sole trader in the UK, you need to register with HMRC. This process is free and can be completed online. Most people receive confirmation of registration within 10-15 days, but it may take longer if your business involves employees or import/export. 
 
As soon as you’ve registered, it’s a good idea to think about your business’s online presence so potential customers can find you. Start by choosing a reliable web host, registering a domain name, and creating a website. You can search for your domain name here:

 

We’ll come back to the website a little later.  

Taxes 

As a sole trader, you’ll pay income tax on your business profits through the Self Assessment tax system. You’ll also need to pay National Insurance contributions. Depending on your business’s size and revenue, you may also need to register for VAT. 

Can I hire employees? 

As a sole trader, you’re allowed to hire employees, however you’ll need to register as an employer with HMRC. Many sole traders start by handling all aspects of the business themselves and hire help later if the workload grows. For example, if you run an online shop, you might consider hiring a virtual assistant to manage customer service or social media posts. 

How do I pay myself? 

As a sole trader, your business profits are effectively your income. However, it’s essential to ensure you retain enough of the profits to keep the business running smoothly. You must also declare your expected profits or losses in your Self-Assessment tax return.   

Take your business online 

Regardless of the type of business you want to run, it’s crucial to establish a strong online presence from the outset. Even if you provide physical services like cleaning or pet sitting, most customers will want to learn more about your business before making a purchase.  

A well-designed website ensures your potential customers can find you and explore what you have to offer. 

Create a website for your business in minutes 

With one.com’s beginner-friendly Website Builder, you can easily create a professional website for your business – even if you have no coding skills or technical expertise. The built-in AI assistant handles all the technical work for you. Simply input key details about your business, and our AI will generate a complete website for you in minutes. It can also help you craft compelling text for your site. 

Prefer to build your site without AI? You can choose from a wide range of templates tailored to different industries. Whether you build your site using AI or templates, you can easily customise the design with drag-and-drop tools.     

If you’re looking for more advanced functionality and customisation options, consider building your site with WordPress. Choose from a variety of WordPress plans.  
 
If your dream is to run an online shop, our Business + E-commerce plan includes everything you need to get started quickly and welcome your first customers. 

Earn money online as a sole trader 

Once you’ve registered as a sole trader, you can start building the business you’ve always dreamed of and begin earning money online. 

Still working on your business idea? Check out our step-by-step guide to writing a business idea. 

At one.com, you’ll find all the tools and solutions you need to establish a strong and competitive online presence for your business. Start now and have your new website or online shop up and running today. Good luck with your new business!