Being a sole trader means that only one person owns the business and either works alone, or employs others. It is the most straight forward way to start a business. .
Advantages of being a sole trader.
1- There are few legal formalities in establishing the business apart from informing the Inland Revenue and Custom and Excise with regards to your income tax, national insurance and possibly VAT. TAX and the sole trader. There are also rules governing your choice of business name you wish to trade under. Business names and the rules.
2- All profit generated by the business is classed as personal income (which is subject to tax).This may suit people who want to start off their business on a relatively small scale. .
3- The business accounts do not have to be audited. Limited companies have to file their accounts with Companies House for public access.
Disadvantage of being a sole trader.
1- The sole trader has unlimited liability. In other words should the business fail then the sole trader is responsible for all debts. All personal assets can be seized to pay of debts. It is advisable to contact a solicitor to secure personal assets.
Setting up a new Business.
Ownership.
The type of ownership for the business will be a partnership. This is the most obvious choice as there are two people involved, my business partner and me. A partnership can involve between two and twenty partners allowing for further expansion and more financial backing if needed. The partnership would be owned in a ratio of 60:40, me owning 60%. This means we would share the cash input and profits and losses in this ratio, which is bad in the short-term for me, but hopefully good in the long-term. A partnership brings additional expertise from all the partners. A formal partnership agreement would have to be drawn up to settle any disputes. The problems with a partnership are that there is unlimited liability meaning that it is possible to lose personal possessions e.