What counts as a small business?

sams247

OK, so it may be a daft question but..........

What is the difference between basically being self emplyed and running a business?

If I, for example, have a main employment and I decide to buy a lot of hairbands from a wholesale unit and sell them at the market once a week as a sideline, do I register as self employed and declare my profits to the tax man, or is this a business that I have to register?

Thank you

System

self employed I think, this is what I do

Savvy_Sue

I'd say it was a matter of personal preference: you might say it becomes a 'business' at the point at which you call yourself "Sam's Sundries" rather than Sam Whatever. But it's rather a moot point, because you still wouldn't have to do anything more than be registered as self employed and pay tax on your profit from the hairbands.

You get too busy with Sam's Sundries to go to the market every week, you notice that I'm there most weeks selling something a bit similar, we like each other so you suggest we go into partnership. We get some legal advice in case we fall out, but we're still two self-employed people, working in a partnership. It's a business, but we don't register as a limited company.

We get to the stage where our turnover is near the VAT level, we are employing six staff, we're fed up of packing hairbands on our kitchen tables so we want premises - maybe NOW it's time to think about becoming a limited company.

That's a very simplified layman's guide, and an expert may correct my ideas.

Wywth

sams247 wrote: »

OK, so it may be a daft question but..........

What is the difference between basically being self emplyed and running a business?

If I, for example, have a main employment and I decide to buy a lot of hairbands from a wholesale unit and sell them at the market once a week as a sideline, do I register as self employed and declare my profits to the tax man, or is this a business that I have to register?

Thank you

You might run a business, but not be self employed. i.e. you might be running a business for someone else for which they pay you a wage.

If you are self employed, then you almost certainly also run a business (i.e your own)

As for what constitutes a small business, well HMRC define what they consider a small business is on their website
Others may have other definitions, but I've only come across the term with HMRC.

You only need to register a company if it is limited, or the few other categories that Companies House register. See the Companies House website for details.

TheBusinessFixer

Hi Sams247

Selling the hairbands would mean you are trading as a soletrader and are self employed. This requires you to register with HMRC and you will have to complete a tax return each year and pay over any additional tax due on the profits made from selling hairbands.

If you grow to where profits are over £20k it may be worth looking a starting a Limited Company as there are tax benefits, but I would get advice from an accountant before reaching that stage.

Hope that helps.

sams247

Thank you all, that helps a lot. I have found out a lot about tax, accounts, recording , sourcing, stock etc but this last bit had me confused. I am now clear. Thank you