A sort of business in which the possession, of all the business resources and responsibilities, is connected with a single owner is known as a sole trader. The only concerned person enjoys all the aspects of the business including rewards, profits, risks, suffers, and losses while operating a business. In the case of private limited companies, the sole trader does not consider as a separate legal body from its possessor. There are unlimited responsibilities are applied to the owner to pay all the dues even to compensate by selling the personal properties. Comparatively to the partnership, the sole trading works under the complete power and control of a single person.
The capital of a business can be driven only from the personal estate of the owner. The business is not allowed to meet potential investors for the purpose of the partnership. Therefore, there is a limited excess of business for capital investment. However, the investment for a business can be considered by the small funding organization for a business under certain conditions.
In the case of profit or gains, a sole trade business does not require paying tax. However, these gains or profits are calculated in the personal yearly tax of the owner under general income tax rules.
Losses in the business are adjusted against the income of the owner from other sources including current and previous years. If all earnings already evaluated to tax on the individual as business profits, then no tax will be charged on the withdrawn profits of a business.
Business is administrated with the entrepreneurial style of organizational arrangement. A single person mentality designs all the rules and regulations. Instead of taking the suggestions of affected individuals the decision is often imposed. The role of the manager in business is to support and assist the trading affairs whereas technical assistance can be taken from accountants.
If the taxable supplies exceed the threshold limit of £83,000, VAT registration is required by the sole trade business.
Under the given conditions a person can be considered as a sole trader:
On the other hand, an employee and an employer both can be self-employed at the same time. For instance, a person does work for an employer in the day time and in the evening time, he runs his own business. The condition of self-employed or sole trade also applied to a person if he or she is trading.
With the use of power and control, the entrepreneur can maintain their aggressive mode of work. This is because no one has the authority to confront their decisions.
The owner can use the assets of the business for personal uses without any tax implications.