Sole Trading
Sole trading is the activity carried out by a sole trader; this is an individual who is operating a business on their own. A sole trader is classed as someone who has their own business and they are the sole owner. Being a sole trader means numerous different ownership implications in regards to liability but there are also numerous different benefits associated with being a sole trader. There are many sole traders operating within the UK and they are regarded as the backbone of British business. For example a local independent newsagents will usually be managed in the form of a sole trader. Generally sole traders operate small independent businesses with specific industries.
Being a sole trader is regarded as the simplest way of owning a business as it does not include many fees. For example registration fess are not required and the accounts keeping is generally inexpensive. A sole trader is also in the position to keep all of the profits and this is one of the biggest benefits of being a sole trader. Whilst there are many benefits included within sole trading there are also numerous drawbacks. For example a business sole trader will be personally liable for any debts within the business. A sole trader does not have limited liability instead they have unlimited liability; this means that there is not a limit on what can be taken from the individual in order to fund their debts.
Similar to any other business when a business is sole trading there must be full records relating to the accounts and finances of the business. A sole trader will choose to operate in this form for many different reasons. A person may feel that the business is too small to share or they may just wish to own all of the business; this would mean they keep all of the profits.
Whilst sole trading is very popular it is also very difficult when operating in this way. Businesses operating as sole traders have faced major difficulties during the recession and many businesses have closed down. It is also very difficult for sole traders to secure financing from a bank; this has become increasingly common as a result of the recession. Many sole traders struggle to compete against large major businesses in some industries; this mainly due to the financial and professional expertise that large businesses have in comparison to small sole traders.
