Sole Trader Setup Steps

C

CompleteNewbie

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Hi,

Because, I know there are individuals out there far more knowledgeable than I am, could I ask for some concise steps in setting myself up as a sole trader? I am part-time PAYE also, thus would be doing both concurrently. I am at exactly Point 0 in the process, thus a blank canvass.
My business turnover would be coming well under the VAT threshold amount.
So grateful for any assistance. Think the 'ladybird' version of advice!
 
Heading into the winter now there are probably a lot of Enterprise Boards running local Start Your Own Business courses, can be very useful inexpensive way of getting info, times usually suit people already working too. I know I did two different ones way back when and definitely good for knowledge and to chat to others in same situation.
 
Hi Newbie

First of all, you have made the correct decision to operate as a sole trader rather than a limited company. It's much simpler and easier to set up and operate. If your business develops, then you might review whether a company is important or not.

Some people worry that if they make some mistake, that Revenue will come down on them like a ton of bricks. There is no basis for this. Revenue understands that sole traders don't fully understand the system and are usually not making huge profits so they are not too concerned.

It's probably a good idea to open a separate bank account and keep your personal financial affairs separate from your business affairs. It will make bookkeeping and accounting very easy.

The main thing you need to do at this stage is to keep a good record of receipts and expenditure. You can do that in Excel if you are comfortable with it. Or even in a notebook if that is easier.

If you buy stuff for your business, keep your receipts. If it's not clear what they are, write down on them what they were for. Otherwise, you will forget.

Will you be getting paid in cash? Make sure that you note how much cash you take in every day.

Or will you be invoicing people and then chasing them to pay you? If so, you would need an invoicing system of some sort.
 
Some other issues to consider...

1) Will you need public liability insurance? What sort of business is it? Could your customers sue you if something goes wrong? If so, you need to talk to an insurance broker and take out insurance against this as it's a very litigious country.

2) Will you be trading under your own name? If you are trading under a business name, e.g. Complete Fruit, you are required to register the business name. It's not a big issue and it's unlikely that the Companies Office will come after you if you don't. But it's a very simple and cheap process. https://cro.ie/registration/business-name/

3) At some stage, but not yet, you will need to think about declaring your profits for tax purposes. I probably wouldn't worry about this just yet. Focus on setting up your business and getting customers and then, when you are making profits, come back here and get further information.

You should register for tax as a sole trader but you won't have to do anything else for a while.

How to register for tax as a sole trader

This page explains how to register for tax as a sole trader
www.revenue.ie www.revenue.ie

Brendan
 
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You can prepare annual accounts up to any date you like. For example, if you started on 1 September, you can prepare accounts for 12 months to 31 August.

My suggestion is that life is a lot simpler if you prepare accounts up to 31 December. (Unless it's a seasonal business like retail, where you might want to prepare accounts to the end of January and the sales are completed.)

When you are up and running , you will be taxed as follows - assuming you are making a profit.

For the year 2026, you will have to pay Preliminary Tax for the year by the end of October. So you estimate your profits and pay the Income Tax accordingly. All you do at that stage is send in the payment. Then by the end of October 2027, you must make a tax return for the year 2026, work out the exact tax and pay any balance that is due.

I don't know what happens in a new business.
For example, if you set up on 1 September 2024 and you make a profit in the 4 months to 31 December 2024, do you have to make a payment by the end of October anticipating your profits for the year?

There are all sorts of complex rules if you set up on 1 Sept and prepare accounts to some date other than 31 December. If you are not making huge profits or losses, then just make your accounts up to the 31 December. If you are making big profits or losses, there may be tax planning opportunities, and you would need to sit down with an accountant.

As I have already said, Revenue is not the demon which it is often portrayed as, and understands small businesses.
 
It's actually pretty straightforward once you sit down & go through the bits. Brendan has laid out most of it, if not all!
The bank account is important as it separates the business from personal.
When I started nearly 20 years ago, on opening the business account in the bank, it gave me a free meeting with an accountant, and in that meeting they laid it all out in terms of what I should be doing. I'm still with those accountants...so a good accountant is worth the grand or so it will cost each year.
You can use Quickbooks or Sage if you want to help with accounts, and I did for a while, but my accountant was always happy with a simple record book with two columns, money in, money out! I was organised so all was pretty easy for them, still is! When it came to it after 2 years in business, I had to deal with VAT, my accountants laid it out, how to do it, and I did that myself bi-monthly.
 
myate said:
It's actually pretty straightforward once you sit down & go through the bits. Brendan has laid out most of it, if not all!
The bank account is important as it separates the business from personal.
When I started nearly 20 years ago, on opening the business account in the bank, it gave me a free meeting with an accountant, and in that meeting they laid it all out in terms of what I should be doing. I'm still with those accountants...so a good accountant is worth the grand or so it will cost each year.
You can use Quickbooks or Sage if you want to help with accounts, and I did for a while, but my accountant was always happy with a simple record book with two columns, money in, money out! I was organised so all was pretty easy for them, still is! When it came to it after 2 years in business, I had to deal with VAT, my accountants laid it out, how to do it, and I did that myself bi-monthly.
Click to expand...
Thank you so much, and your advice seems very grounded. Much appreciated.
 
Brendan Burgess said:
You can prepare annual accounts up to any date you like. For example, if you started on 1 September, you can prepare accounts for 12 months to 31 August.

My suggestion is that life is a lot simpler if you prepare accounts up to 31 December. (Unless it's a seasonal business like retail, where you might want to prepare accounts to the end of January and the sales are completed.)

When you are up and running , you will be taxed as follows - assuming you are making a profit.

For the year 2026, you will have to pay Preliminary Tax for the year by the end of October. So you estimate your profits and pay the Income Tax accordingly. All you do at that stage is send in the payment. Then by the end of October 2027, you must make a tax return for the year 2026, work out the exact tax and pay any balance that is due.

I don't know what happens in a new business.
For example, if you set up on 1 September 2024 and you make a profit in the 4 months to 31 December 2024, do you have to make a payment by the end of October anticipating your profits for the year?

There are all sorts of complex rules if you set up on 1 Sept and prepare accounts to some date other than 31 December. If you are not making huge profits or losses, then just make your accounts up to the 31 December. If you are making big profits or losses, there may be tax planning opportunities, and you would need to sit down with an accountant.

As I have already said, Revenue is not the demon which it is often portrayed as, and understands small businesses.
Click to expand...
Thank you so much Brendan. The 1st January advice is very sound. Take care.
 
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