Track 43

Track 43.

Thank you, Dr Lethbridge, for your introduction.

I’d now like to move on to the details of each type of business structure and discuss the advantages and disadvantages of each, starting with the sole trader.

This is simply a person who runs a business alone.

On the practical side, there’s no need to register with Companies House, which means the sole trader is not legally the same as a registered company.

The trader can simply choose any name and start trading without paying any fees.

There’s no need to register an office, so the trader can even work from home.

There are also no legal requirements to submit financial accounts to Companies House.

As a result, this is the simplest and most straightforward way to start out in business and work for yourself.

Another benefit of being a sole trader is that you are your own boss.

You don’t have to answer to anybody else, you make your own decisions and you don’t have to share your earnings with a partner.

However, it doesn’t mean that you have to do everything alone.

You can also employ or give contracts to other people to do work for you, though, of course, you need to be aware of regulations regarding employing others.

So these are the desirable aspects of being a sole trader, but there are other matters which need careful consideration. When you’re in employment, you are taxed at source, which means your employer takes your tax from your earnings every month and sends it to the tax office, so you don’t need to worry about it.

However, as a sole trader, you are self-employed, which means you are responsible for what you earn, what you spend and the tax that you must pay.

This means you have to complete an annual tax return.

This is a document which you send to the tax office once a year showing what you earn from your business and what you spend in running your business.

On the positive side, you’re only taxed on your earnings after expenses, such as transport, electricity, office equipment and so on.

So, if you work from home, you can save tax by declaring some of your use of electricity as necessary for your business. Another consideration is that if you earn over a certain amount, you pay a higher rate of income tax, which is higher than the corporation tax rates that companies pay.

You’ll also have ‘unlimited liability’, which means that if you can’t pay your business debts, you may lose your house and car to pay for them, as you are your business.

Finally, many sole traders find it difficult to take holidays and breaks from the business and find that they spend far more time working than employed people.

The typical traders associated with this type of business structure are skilled manual workers, such as builders, plumbers and electricians, or professions in which people usually work alone, such as photographer sand writers.

However, increasingly these days, with the reduction in long-term employment and job security, sole traders are coming from other professions, such as computer programming and even teaching, especially tutoring.

Certainly, being a sole trader is a very useful way of starting out in business by yourself.