A sole businessman is the simplest form of business where only one person has ownership rights and is responsible for all assets and liabilities. In this format of business, only one person is liable for enjoying rewards and profits as well as facing losses and risks of the business operations. Being a sole proprietor, one has an indefinite responsibility to deal with all of his debits as a sole proprietorship is not any separate entity apart from its owner. Solely operated businesses are always run under the direct control and authority of a single person in comparison to partnerships.
Capital Investment and Profit Sharing
In the case of sole trading business, the capital and investments will be drawn out of the owner’s wealth or estate, and such businesses can not invite others to invest in them under the status of partnerships or private limited firms, so they have limited excess to capital investments. While such kind of ventures can get investments from startup funding organizations and individuals by complying with certain terms and conditions. Also, the withdrawals of money or profits from businesses do not require any permission from any other entity or the payment of any additional taxes.
A sole trader is liable for paying tax under the cap of personal tax or income tax under the imposed taxation rules and regulations, instead of paying tax on profits and gains from the trade as a business. One will be paying under the self-assessment taxation system instead of corporate taxes. Consequently, losses will also be adjusted against proprietor’s other sources of income as well as taxable gains of the current or previous years. No tax will be charged when returns are withdrawn from the business as all incomes are already evaluated to tax on the individual as trading gains.
Business Management Structure
In sole proprietorships, businesses are governed with the entrepreneurial management structures, and all the regulations and rules are determined by a single person, and most of the time, decisions are imposed instead of getting suggestions and feedback of people who will be affected. In such kinds of businesses, managers are only the assistants to support business matters, and accountants are for financial management only, and all the decisions are up to the owners.
According to the UK’s taxation laws and regulations set by the HMRC, sole traders are also bound to be registered for the VAT if their annual turnover is equal to £85,000 or above. A business that is expecting to meet this threshold within the next 30 days, it is also required to be registered in the same duration.
Difference between Self-Employed and Sole Trader
One will be considered as a sole trader if he/she is running a business for his/herself and is responsible for every success and failure in it, have many customers at a time, no bounding to finish any work, hiring people at his/her own expenses, buy equipment, and make decisions. While a self-employed person can be both employer or employee at the same time. For example, one can be working for others in the morning while doing his/her business in the evening. Also, any person who does trading is too counted in the category of sole proprietors or self-employed people.
Advantages and Disadvantages of Being Sole Trader
Being alone authority, sole proprietors can maintain their aggressive style of working through their power and control as there is no other authority who can challenge them in contrast to other business structures where there are too many people responsible for decision making and managing businesses. One of the key benefits of being a sole trader is the authority to invest or withdraw investments for personal use without any tax liability, while in other structures, it is not possible. On the other hand, the main flaw of being a sole trader is the risk of creditors and payables’ access to the personal property of the owner in the case of failure in business or bankruptcy.
Our Key Services for Sole Traders
- ProAccountax is ever ready to facilitate sole traders in the best possible ways. Being a sole trader, you can get benefits by us as we efficiently provide:
- Dedicated industry-specific accountants yet
- Support in the implementation of the accounting system
- Manual and automated accounting services
- Dealing with legal and HMRC related aspects
- Faster VAT and PAYE registration
- Advice on tax-efficient salaries and disbursements
- Dealing with your VAT and Self-assessment Taxes
- 24/7 customer care services
- Reminders for all important deadlines and updates on the regulations by HMRC
- Help for trademark registration
We offer a vivid range of additional facilitation services along with quality accounting services at the best affordable prices for your businesses. Our fee is fixed yet competitive that is starting from £20 for sole proprietors. So, what are you waiting for? Put your details and get perfect quotations.