What is a sole trader?

What is a Sole Trader, and Should I Register as One?

If you are starting a small business in the UK, you may be wondering whether to register as a sole trader. A recent report shows that approximately 76% of all UK businesses are sole traders.

Does your business:

  • Have low turnover?
  • Have relatively low risk?
  • Have a single owner?

If all of these ring true, you will likely want to register as a sole trader rather than a limited company.

If I register as a sole trader, am I then a ‘company?’

The short answer to the question above is ‘no’. This is a common misconception, with people regularly getting these issues confused.

Think about it this way – a ‘sole trader’ is an individual person who is conducting business in their own name.

A company is something different – it is a business that has been registered and ‘incorporated’ as a Limited Company. Legally, it is a separate entity from any person involved in its operation. Its directors and shareholders are legally separate from the company.

As a sole trader, can I adopt a business name?

Not all of us want to run our professional dealings under our own name – we would prefer to operate under a business name. As a sole trader, you can absolutely use a business name, which is also sometimes referred to as a ‘trading name.’

Here is a practical example:

Jane Bloggs has started a small blog writing company. She is happy to conduct all business under her own name, and she issues all invoices and quotes as “Jane Bloggs,” and uses her home address as her business address.

However, if she decides to change things up and go by “Bloggs’ Blogs,” she is still a sole trader, but the full legal name of her business becomes:

  • Jane Bloggs trading as Bloggs’ Blogs OR
  • Jane Bloggs t/a Bloggs’ Blogs (the ‘t/a’ used here means ‘trading as’)

All of the official documentation she produces (including invoices, quotes, and her professional website) must include one of these 2 options. She may choose to include these on her letterhead, as well as in the footer of her website.

If I register as a sole trader, won’t people think I am a small, home-based business?

While some people might see that you are registered as a sole trader and assume you are a purely solo act, this is not always the actual case. In fact, many sole traders hire other people to work for and with them.

You might be familiar with Sports Direct? Owner and founder Mike Ashley started his wildly successful sports goods chain back in 1982, but he didn’t transfer it from being a sole tradership to a Limited Company until almost 20 years later, by which time he had more than 100 stores!

You can also think of it this way: a business registered to a sole trader is 100% owned by the sole owner. This means that they do not have shareholders, directors, or partners.

By now, you have probably made up your mind about whether or not your business should be conducted under a sole tradership or as a Limited Company. No matter which one you choose, make sure you follow all of the rules and regulations associated and get registered in time for you to start trading.

Setting up as a sole trader is probably easier than you think, you can do it through the government’s website here.

Are you ready to become a sole trader? What’s your main reason for choosing it over a limited company? Please share your thoughts.

 

Kara Copple
An experienced business and finance writer, sometimes moonlighting as a fiction writer and blogger.

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