WORKING AS A SOLE TRADER

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Sole trader or “sole ” is the name of the type of business that one person and controls. This person makes all of the decisions for the business and keeps any that the business makes. There are no partners or shareholders to share with, which can mean that a sole trader becomes rich quite quickly. However, he or she is also personally liable for any losses.

There are some advantages to being a sole trader. Firstly, it is easy to up this kind of business. In the U.K. you only need to register with the tax authorities, (H.M.R.C.), and declare that you are self-employed. You must do this within three months of starting the business. There is no cost to this, as there is no registration . Another advantage is that a sole trader does not need to complete the complicated forms that a limited company is obliged to fill in. Nor does a sole trader have to provide the detailed accounting information that limited companies must produce. However, a sole trader must prepare accounts for his or her self assessment tax return, which is the document that declares yearly profits and tax liability. Another advantage is that all the financial information of a sole trader is private, unlike U.K. limited companies, which need to accounts each year at Companies House. The accounts of limited companies are accessible to the public.

The main disadvantage of being a sole trader is that the owner of the business is solely liable for any consequences of business failure. This means that in a situation where the business cannot pay its because it doesn’t have enough money, the sole trader may lose his or her personal such as his or her home, as a consequence. A sole trader may also be liable for other things, such as injuring a customer due to a of the duty of care. For this reason, a sole trader must buy public liability in order to be sure that he or she can meet the cost of any claim.