Sole Trades - an introductionPossibly the simplest kind of business to run, a sole trade (otherwise known as a sole proprietorship) is a business that is owned by one individual, and from a legal perspective there is no difference between the business and the individual – this is explained in greater depth in the book.
A sole trade can be set up very easily, and only requires minimal form filling to be registered with HM Revenue & Customs. There is no other form filling required, and no requirement to file accounts publicly, so discretion about the businesses finances is achieved.
Sole trades are referred to by their proprietors name, and will usually adopt a trading name, such as the following:
Mrs Smith trading as (or t/a) Yummy Cake Shop
There is no protection over the name, and if it isn’t trademarked there is every chance that another business could use the name.
Financially, sole traders have some disadvantages when compared to limited companies (at the time of writing). Firstly, as they are legally considered to have no difference from their owner, the individual would be deemed liable for any business debts, and indeed a business failure could well result in personal bankruptcy.
They also have a different tax treatment to limited companies, in that the entirety of the profit of the business is deemed to be the income of the proprietor for income tax purposes. This is explored further in the book.