A sole trader is an individual who operates a business in their own name.
There aren’t many legal requirements to set up as a sole trader.
You can register a business name, and you’re away! If you trade under your own name, you don’t even have to do that. You can just open up shop.
A sole trader runs the business in their own name. All profit is profit of the sole trader personally. That includes profit on sale of the business later.
If you don’t think the business will make huge money, you don’t plan on having large creditors and the risk of getting sued is pretty low, then it might make sense to set up as a sole trader. Setting up as a lawn mowing contractor with no employees would be a business that would lend itself to being a sole trader.
The biggest issue with being a sole trader is that you personally take on all of the business risk. That means that any litigation against your business will be against you personally. And any claims by suppliers or lenders for money owing will be against you personally. The other area of risk is that if you have employees, you can be personally held liable for loss and damage they cause to other people.
Last of all, if you happen to make huge profits, there is no way of legally reducing your tax bill.
Food for thought from Your LegalHQ.
Disclaimer
This information is purely educational in nature and is not legal advice. If you require legal advice about any of the matters raised here, you must call a solicitor and obtain advice based on your individual circumstances.
