Sole Trader & Legalities

[Owensy1405]

Morning All

If looking for some advice regarding a new business venture, basically my wife is in the process of starting a small 'cottage industry' gift and craft type hobby business in addition to her normal PAYE job. Without going into too much detail, she will be buying unbranded items online for example candles, 50ml hand sanitiser bottles (empty) and making artificial flower boxes etc, personalising them and selling them, initially through her F'book and I'gram pages then onto Etsy and such like.

The questions I have are:

Is it perfectly legal and legit to buy an item completely unbranded, personalise it and resell it? Buy candles from Wilko for example and put 'happy mothers day' on it... To clarify, she wont be using any trade marked logos or such like on any of the products.

She will be running this from home as a sole trader, so would she need any kind of specific insurance or licences? Does she need to provide our home address for any returns or can she set up a PO box or similar?

I've read online that she doesn't need to register for self assessment until she has made £1000, is that profit or turnover?


I appreciate these are probably quite basic questions and this is hardly going to make us millionaires and there is lots of these type of business' out there but she's happy and enjoys it. Any advice would be great, thanks.

Thanks

[Eric Mc]

Owensy1405 said:

Morning All

If looking for some advice regarding a new business venture, basically my wife is in the process of starting a small 'cottage industry' gift and craft type hobby business in addition to her normal PAYE job. Without going into too much detail, she will be buying unbranded items online for example candles, 50ml hand sanitiser bottles (empty) and making artificial flower boxes etc, personalising them and selling them, initially through her F'book and I'gram pages then onto Etsy and such like.

The questions I have are:

Is it perfectly legal and legit to buy an item completely unbranded, personalise it and resell it? Buy candles from Wilko for example and put 'happy mothers day' on it... To clarify, she wont be using any trade marked logos or such like on any of the products.

She will be running this from home as a sole trader, so would she need any kind of specific insurance or licences? Does she need to provide our home address for any returns or can she set up a PO box or similar?

I've read online that she doesn't need to register for self assessment until she has made £1000, is that profit or turnover?


I appreciate these are probably quite basic questions and this is hardly going to make us millionaires and there is lots of these type of business' out there but she's happy and enjoys it. Any advice would be great, thanks.

Thanks

There is no statutory law preventing a business from buying from a retailer and reselling the product, perhaps modified etc. However, there might be a situation where there is a restriction placed by the retailer on onward sale of certain items. Examples I can think of would be multi-packs of crisps/snacks or fizzy drinks. You often see messages on packs and cans saying things like "not to be sold individually".
The other restriction could be in connection with product safety. If you buy something that has, say, a "CE" certification, modify it and sell it on, you might nullify the safety certification of the original product. That would be especially true of toys and perhaps any items that were powered.

If you set up a business, insurance is always something that needs to be considered. In some activities, it might be compulsory. In general though, it is advisable.

The £1,000 threshold refers to "Turnover" i.e. "Sales".

HMRC has a general exemption (nothing to do with the £1,000 threshold) regarding trading activity that is really a hobby. If a person is selling stuff and billing over £1,000 - but consistently make losses, HMRC are quite happy to excuse that individual from having to complete Self Assessment tax returns because they are not losing out on any tax since the "business" isn't generating any profit on which tax could be charged.

On the other hand, the trader is losing out in this situation because having trading losses can be very useful as a means of recovering tax from other areas (such as PAYE) or carrying the losses forward for offset against any future profits the business might make in the future.

[Owensy1405]

Eric Mc said:

There is no statutory law preventing a business from buying from a retailer and reselling the product, perhaps modified etc. However, there might be a situation where there is a restriction placed by the retailer on onward sale of certain items. Examples I can think of would be multi-packs of crisps/snacks or fizzy drinks. You often see messages on packs and cans saying things like "not to be sold individually".
The other restriction could be in connection with product safety. If you buy something that has, say, a "CE" certification, modify it and sell it on, you might nullify the safety certification of the original product. That would be especially true of toys and perhaps any items that were powered.

If you set up a business, insurance is always something that needs to be considered. In some activities, it might be compulsory. In general though, it is advisable.

The £1,000 threshold refers to "Turnover" i.e. "Sales".

HMRC has a general exemption (nothing to do with the £1,000 threshold) regarding trading activity that is really a hobby. If a person is selling stuff and billing over £1,000 - but consistently make losses, HMRC are quite happy to excuse that individual from having to complete Self Assessment tax returns because they are not losing out on any tax since the "business" isn't generating any profit on which tax could be charged.

On the other hand, the trader is losing out in this situation because having trading losses can be very useful as a means of recovering tax from other areas (such as PAYE) or carrying the losses forward for offset against any future profits the business might make in the future.

Thank you for that, regarding the buying and reselling that's what I thought but I found it difficult to find a definitive answer online.

Working from home, what kind of insurance would be appropriate? Liability? Commercial premises?...

Thanks

[Eric Mc]

Can't answer what the correct insurances might be. Your Mrs needs to assess where her risks lie and take out the appropriate insurance. She might be happy not to bother.

Is she likely to be sued for defective products?
Are the products she sells likely to kill or injure someone?
Is she going to do things that endanger the public?
Is she planning on having employees?


Is there any sort of trade organisation she might want to join? I think that the Federation of Small Businesses (FSB) is quite beneficial for, you guessed it, small businesses.

[Simpo Two]

You're right to be asking these kinds of questions before setting up. Anticipate all problems and have solutions! You'll probably find that some of the problems never happen and new ones will - but that's life!

Reselling - most of the world seems to do that, so carry on. Wilko probably buy their candles from the Happy Candle Company in Beijing and resell them...

Insurance is up to you. I started with PI and every business insurance you could think, then gradually ditched them after 2-3 years as my confidence and knowledge grew. It's likely to wipe out much of her trading profit I think. Licence, nope unless you're using brands/trademarks. Return address - either would do; the PO Box is anonymous but costs money. It doesn't seem to be the sort of business where an irate customer would come round and break your windows.

Essentially if you're only going to be making £1,000 a year, keep overheads to a minimum or you can easily wipe out your profit. As as a director of mine once said 'If you're going to go bankrupt there's no point working for it, you may as well put your feet up and enjoy it!'

Good luck

[Owensy1405]

Eric Mc said:

Can't answer what the correct insurances might be. Your Mrs needs to assess where her risks lie and take out the appropriate insurance. She might be happy not to bother.

Is she likely to be sued for defective products?
Are the products she sells likely to kill or injure someone?
Is she going to do things that endanger the public?
Is she planning on having employees?


Is there any sort of trade organisation she might want to join? I think that the Federation of Small Businesses (FSB) is quite beneficial for, you guessed it, small businesses.

Given the nature of the products she will be making and selling, I would expect the risks of harm to anything/anyone to be extremely low, however its something to look into further and decide upon. No plans for employees other than me running around after her...

She's joining a couple of forums to speak to people with similar kinds of business and i'd forgot about the FSB so thanks will look into that too.

[Owensy1405]

Simpo Two said:

You're right to be asking these kinds of questions before setting up. Anticipate all problems and have solutions! You'll probably find that some of the problems never happen and new ones will - but that's life!

Reselling - most of the world seems to do that, so carry on. Wilko probably buy their candles from the Happy Candle Company in Beijing and resell them...

Insurance is up to you. I started with PI and every business insurance you could think, then gradually ditched them after 2-3 years as my confidence and knowledge grew. It's likely to wipe out much of her trading profit I think. Licence, nope unless you're using brands/trademarks. Return address - either would do; the PO Box is anonymous but costs money. It doesn't seem to be the sort of business where an irate customer would come round and break your windows.

Essentially if you're only going to be making £1,000 a year, keep overheads to a minimum or you can easily wipe out your profit. As as a director of mine once said 'If you're going to go bankrupt there's no point working for it, you may as well put your feet up and enjoy it!'

Good luck

Thanks, there's some great info and advice there, I really appreciate it.

Wilko is just an example as they have some good deals on with the candles for her but looking at suppliers in china where the Wilko ones are made. It seems that there are some huge savings to be made dealing direct relative to the current prices shes paying for stuff for her.

[Superleg48]

Certainly she will not need commercial insurance for a hobby business like this.

I would advise that you contact your current home insurance provider and just let them know what you are planning to do, but keep it low key. Small part-time craft business selling products on line type of thing.

You may also need to contact your mortgage provider too. You’ll need to check the Ts and Cs.

It is highly unlikely to be a problem for either but it just keeps things transparent, especially re: insurance.

If you rent your property, you may need to get permission from the Landlord. Check your AST for any clauses relating to running a business from home.

Good luck with the venture.

[Eric Mc]

Buying from a retailer will mean she is including their mark up in her pricing structure - which may not be clever, if you can get the same product direct.

However, she is not Wilko so what type of prices would she be able to get from the Chinese supplier - or would they be even bothered selling to her given that her purchases will be minuscule compared to a large retailer?

[Owensy1405]

Thank you all for the advice, we really appreciate it.

Looking into insurances, although from what I've seen and from what I think there isn't much if a need if any at all.
Speaking with our mortgage lender and home insurance tomorrow.

[DSLiverpool]

What your wife is doing I discuss several times a week now.
Liability insurance as a minimum.
Bundling several items bought from wherever is a strong effective way to easily differentiate.
If she wants a chat I’m happy to help.

[Simpo Two]

Owensy1405 said:

Wilko is just an example as they have some good deals on with the candles for her but looking at suppliers in china where the Wilko ones are made. It seems that there are some huge savings to be made dealing direct relative to the current prices shes paying for stuff for her.

Indeed, and a pound saved is a pound earned. You're probably not in a position to order a container-load from China (yet lol) but maybe a cash & carry account would be worth looking at as an interim. You don't know if she's going to sell 10 candles or 10,000 so you have to feel your way in. If the wagon starts to roll you can order in bulk and perhaps ease the RSP up - both of which increase your profit margin.

[Pot Bellied Fool]

Don't forget that you need a safety sticker on candles. No point leaving the original branded ones on, replace them with one with your own details/social/website on to stand a chance of re-orders.

[Simpo Two]

Pot Bellied Fool said:

Don't forget that you need a safety sticker on candles. No point leaving the original branded ones on, replace them with one with your own details/social/website on to stand a chance of re-orders.

Good grief. Something like 'Danger: this candle may get hot if lit'? or 'Do not eat'?

[Superleg48]

Simpo Two said:

Good grief. Something like 'Danger: this candle may get hot if lit'? or 'Do not eat'?

Indeed. It has got to the stage now where we have to assume that everyone has the mental capacity of an amoeba and operate accordingly. See: HSE as the prime Amoeba Protectorate.

[Simpo Two]

Superleg48 said:

Indeed. It has got to the stage now where we have to assume that everyone has the mental capacity of an amoeba and operate accordingly. See: HSE as the prime Amoeba Protectorate.

They're assuming amoebae can read...

[Beyond Rational]

There is often a standard that can be followed (i.e BS EN 15493:2019); whether you feel the need will depend on your assessment of the risk posed and potential consequences (if adding tinsel or other flammable frippery, there could be fairly severe consequences), bearing the end user is, as has been stated, often amoeba. Reboxing products that are already certified may be a way to limit risk at the early stages.

This is an extreme example, but it's easy enough to see how a dangerous product could be created:
https://northyorkshire.police.uk/news/playtime-bed...

[Eric Mc]

Even journalists are amoeba now -

"That site included measurements between apertures which would of met British Safety Standards if followed".

[48k]

OP don't forget to do your research on the shipping side if you are going to be sending candles by post or courier. Candles are fragile and candle wax doesn't need much warmth to go soft and start melting.