Q: I’m in the process of setting up an online business selling educational toys. I’ve set myself up as a sole trader, set up my website and enabled it as an online store. Unfortunately I’ve run into a Catch 22 situation because I can’t start trading without stock, and as I’m not trading online I worry about looking like a Mickey Mouse operation to the very companies I’m looking to buy the much needed stock from. Most of my targeted suppliers are on mainland Europe. What can I do to make it clear that I’m a reputable business, and is my sole trader status going to cause me problems?


A: Operating as a sole trader isn’t necessarily a barrier to being taken seriously by suppliers, and there are a lot of advantages to it. What you’re experiencing at the moment is something that a lot of fledgling businesses go through, and there are some things that you can do to establish your credibility as a legitimate business.


The first thing to do is to get a VAT number. You mention that your suppliers are based in Europe, and many European businesses won’t do business with you unless you have one. A VAT number will allow the supplier to verify your business. As you haven’t started trading yet you probably don’t have one, and if your projected turnover for your goods is less than €75,000 you don’t require one by law. However, you can voluntarily sign up for one which would probably be especially helpful in your case.


Another important thing to bear in mind is the maxim money talks. It may be difficult for you to get goods on credit at this early stage, but if you’re able to pay up front most suppliers will have no problem dealing with you. Remember, suppliers are in business too and it’s in their own interests to supply to you. If you don’t have the cash flow available to pay up front, you may have to start trading with a smaller range of products and expand as you build up more favourable relationships with your suppliers.


Even if a company tells you that they require cash up front now, ask them what their criteria is for instalment plans further down the road. Not only is this useful information, it establishes that you are taking your business seriously and that you’re in it for the long haul. It’s a statement of intent.


If you’re still unsure, don’t be afraid to contact them directly. Although it can be intimidating approaching major suppliers as a sole trader, most companies will be happy to tell you exactly what they require from prospective business partners. Chances are they’ve dealt with people in similar situations before, or perhaps been in that situation themselves. We’ve all got to start somewhere!


Best of luck in your business endeavours.


Declan Dolan


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Q: I have been working on a fixed-term contract with a multinational company. However, my contract is up in December, and it’s unlikely to be renewed or replaced with a permanent offer. The reason for this, I’m told, is a company-wide hiring freeze that is expected to change in the middle of next year.

Between now and then, I have been asked if I would like to continue on as a self employed contractor for a number of months. Before I agree to this, I have a few questions about how it will work. Because I will only be working for one company, would the Revenue have a difficulty with my sole trader status? Also, the company is VAT-exempt, but my income will be over the VAT exemption threshold. Will I still need to charge VAT? I would expect also that I will be using my car  for business75% of the time. Will it be possible to claim car-related expenses as deductable because of this?


A: You’re right to be thinking extremely carefully, as making this change in your career is a significant decision. You may be aware, for example, that it will affect your social welfare entitlement if things don’t pan out as you expect. That alone would be enough to put some people off going ahead with this temporary arrangement.


However, if you decide to continue working with this firm, there are a few things you should know. Revenue do have an issue with self-employed ‘contractors’ working exclusively with one company. If Revenue deem you to effectively be an employee, they have the right to assess the company, you or both for any taxes that they deem should have been paid. Therefore, even if you only have one other small client as a sole trader, it’s worth keeping that up.


As for VAT, you will have to charge it. Deductions for use of the car are on a receipted basis for petrol and other expenses. You should keep a detailed diary tracking your business mileage versus your total mileage to get an idea of how much you can deduct. A rough estimate, unfortunately, won’t cut it. If your vehicle will be primarily used for business purposes, your insurance company will have to be informed.


Even though you are thinking of this as a temporary arrangement, it’s important not to assume that you will be made a permanent employee after a few months, so set yourself up in a professional manner. Engage the services of an accountant, keep track of your business expenses and invoicing, and set aside money for your future tax liability.


We advise many people taking the first steps into entrepreneurial activity, and we’re more than happy to offer a no-obligation initial meeting to discuss your needs. Just contact us to get the ball rolling.


Eamonn Garvey


Do you have a question for DCA’s experts? Contact us or connect with us on Twitter.