What does it mean to be a sole trader?
A sole trader is a self-employed individual who is also the sole proprietor of a company. After taxes, the individual is entitled to all gains from your firm and is responsible for all losses.
While sole traders are frequently thought of as a one-man show, it's crucial to remember that the word “single trader” relates to the business structure rather than the number of employees. While a sole trader is self-employed and trades alone, this does not imply that he or she handles day-to-day operations without the help of workers.
What distinguishes a solo trader from other business owners?
Complete command
You have sole ownership and management of your firm as a lone trader. You are totally in command of a wide range of company decisions, from how your operations are conducted to how you wish to grow your business or use your profits, and you don't need to confer with directors or shareholders before making a decision.
There is no separate legal entity.
You and your business are considered one and the same as a lone trader. There is no separate legal identity, which means you will be accountable for all of your company's transactions and operations.
Continuity
This connects to the previous point. A sole tradership is reliant on its owner because there is no legal separation between the owner and the firm. Depending on the owner's personal circumstances, such as death, retirement, bankruptcy, or jail, the firm will cease to exist.
Liability is limitless.
Sole traders are legally responsible for all of their company's debts. There is no limit to the amount of debt a sole entrepreneur can be personally liable for, and as a result, your personal assets could be confiscated to cover business losses.
Individual taxation
On taxable business gains, you must pay income tax, not corporation tax, as well as Class 2 and Class 4 National Insurance contributions. If your business turnover surpasses the existing VAT threshold of £85,000 (for a 12-month period ending in 2020/21), you'll also need to register for VAT.
Administrative and filing obligations are minimal.
Operating as a lone trader requires very minimal documentation.
Sole entrepreneurs aren't required to file accounts or other papers with Companies House, save from their yearly Self Assessment tax return. Maintain in mind that you will still need to keep track of business expenses and income in order to complete your tax returns.
Privacy
You have more privacy as a sole trader since you are protected by HMRC's taxpayer confidentiality rules. You are not obligated to disclose your firm's accounts or data on the Companies House website, unlike limited company directors.
Accounting Firms can help you find qualified accountants, bookkeepers, and tax experts, as well as compare services and fees on a free, fast, secure, and verified website. When you use Accounting Firms UK to find accountants for all of your company needs, we vow to keep our word. We are a completely independent and unbiased portal that allows you to choose an accountant in one spot.
