FAQs
Sole Trader
As a small business, the simplest and easiest entity to establish is the sole trader. After all, it's just you and there's no doubt that you already exist! In a nutshell, a sole trader is just you as an individual trading in your own personal name. Whilst its simplicity can be inviting, I would warn against going down this path for all but the smallest of home businesses.
Advantages
- Simple to establish with little time required to get started.
- Full control is retained by yourself, as you are the business.
- All profits of the business are received by you, in your name.
- You can stop, sell or change the business anytime with little notice required.
Disadvantages
- As the sole trader you have unlimited liability for debts the business may incur.
- As the sole trader you have unlimited exposure to liability for such matters as employee negligence.
- Continuity of the business is dependent on you, your health and your ability to devote time to the business.
- Adding additional partners, associates or investors can be difficult.
- The ability to divest income to other taxpayers and possibly reduce income tax liabilities is not available.