The Sole trader
A sole trader business structure like all of the following types of structure are found within the private sector of the Economy. This sector is owned by private individuals and not the government
A sole trader could have a variety of aims (that is things they might want to achieve by setting up their own business)
Starting up as a sole trader is the easiest way to set up in business for a wannabe entrepreneur (someone who takes the risk of starting a business). The entrepreneur simply needs to register with the Inland revenue as self-employed and can then start trading straight away. If a specific licence is required for the line of business this must of course also be obtained.
The sole trader’s business income will be added to their own personal income and as self-employed the sole trader will have to complete and send
a self assessment tax form annually to the Inland Revenue and they will have to pay income tax on any profits.
The sole trader does also need to register for VAT (Value Added Tax) if they expect their turnover to be more than £67,000 PA
A sole trader is personally responsible for any business debts, which are also personal debts, due to a sole trader having unlimited liability. This means that a sole trader could lose their own possessions if things go wrong.
A more personal service
A sole trader can make all their own business decisions without having to consult anyone else. So a sole trader both owns the business and controls it.
The only ways in which a sole trader can raise money is by getting a loan or using personal money. The banks are likely to insist that any loans given are secured against the entrepreneur’s property or that the entrepreneur matches the loan value with their own personal money.
All profits will go to the sole trader.
A sole trader will often offer a more personal service than a large firm. If they tried to compete on cost alone they would find it difficult since large firms can buy their goods cheaper due to bulk buying.
Since a sole trader business is not incorporated it will have no continuity, in other words it will cease to exist as a business if the owner who sets it up.leaves.