Sole Trader change of business status

connect21

Hi,
Really could do with some advice from anyone in the know. I left a paid job and set up as a sole trader 2 years ago. I saved some money from my employed job and when I left I purchased equipment to hire out in an industry that I know very well. I approached an old work colleague who runs his own business and we agreed I would hire my equipment to him and he would hire to the customer. We did it this way because I can’t maintain or repair the equipment but he can and it would be covered on his insurance. He also had accounts with suppliers to purchase parts to maintain the equipment, where as I do not.

In the 2 years that we have worked together, it has become apparent that he is very bad at paying his bills, and now I can’t get parts from him to fix my equipment. I have put him in touch with suppliers I have known for years and they gave him an account on my word and it is embarrassing and damaging for me that he doesn’t pay. He has a bad reputation, flitting from one supplier to another, and doesn't retain customers becuase he can't get parts in good time so they go elsewhere. I have had numerous conversations with him but there is no point so I am looking at my options now and my future. My thoughts are to get my own parts accounts set up so I can stay in control of them and get things in place so in the future I can trade on my own instead of being so dependant on him.
Should I register a new company with companies house and go vat registered and just get the company on paper and gradually build up suppliers accounts for now. There won’t be a lot of purchases to start with and I could sub contract out the maintenance to my colleague’s business until I have the workload/customers to afford to employ someone myself. Or should I stay as a sole trader and should I register that at companies house? I know I won’t get an account with some suppliers if they search me and can’t find me – hence registering with CH. Long term, I will be hiring my equipment to businesses or repairing their own equipment so I need to portray my business as one with resources and maybe a sole trader wouldn’t give that impression or reassurance? Not sure if I’ve explained it very well, but would appreciate any advice or guidance on best course to take as I feel his company could go bust at some point and at present it would be too damaging for me to survive.

Pennywise

You can't register a sole trader at Companies House.

You can register for VAT as a sole trader - you don't need to be a limited.

You can get trade/supplier accounts as a sole trader - you don't need to be a limited.

You need to properly understand the pros & cons, differences and implications of being a limited company. I'd suggest you do a bit of googling - loads of websites/pages explaining the differences and ramifications. A good start would be asking your accountant as they will know your existing business and are best placed to help you decide what to do.

connect21

Thank you for the quick response but I don't have an accountant at present, I do my own accounts and self assessment.
I will do a bit of digging regarding the limited company etc.
Thankyou

phill99

connect21 wrote: »

Thank you for the quick response but I don't have an accountant at present, I do my own accounts and self assessment.
I will do a bit of digging regarding the limited company etc.
Thankyou

The one thing a small business can't afford not to have is an accountant. They don't just do accounts. They will minimise your tax position in a way that you can't. They can advise on the best business format for your situation.

Not to have an accountant is naive. It is evident that you are lacking in basic business fundamentals and a decent accountant will be worth much more than their fees.