The options for start-up and small businesses - EdexcelSole trader

A sole trader is a business that is owned and run by one person. There is only one owner, but they may have employees who work for them. Sole traders are usually start-ups or small businesses. For example, photographers, electricians, hairdressers, graphic designers, social media influencers, bloggers, small online clothing brand owners and beauty therapists may set up as sole traders.

Sole traders have unlimited liability and the owner is personally responsible for the debts of the business. A sole trader pays income tax on their earnings.

Some advantages of sole trading

• it is quick and easy to set up as a sole trader
• the business owner will have a lot of control over the business and its money
• it gives individuals the opportunity to be their own boss and make all the business decisions
• It has low set-up costs

Some disadvantages of sole trading

• it has the risk of unlimited liability
• it can involve long work hours and stressful conditions
• there is a high level of responsibility for the owner
• often the owner performs many different roles in the business