Description of a Sole Trader Business

Updated March 23, 2017

In the United Kingdom, a sole trader is the equivalent of a sole proprietor in the United States. The sole trader form of ownership appears as the most common type of business in the United Kingdom, according to


A sole trader business operates with a single owner. The sole trader is the easiest way for an owner to go into business, according to A sole trader acts as an unincorporated business that isn't registered with Companies House UK. Sole traders generally are smaller businesses such as local corner shops, plumbers and builders, according to the Complete Formations website.

Decision Making

A primary benefit of operating as a sole trader concerns control of the business. Sole traders have complete authority over the business, and they may operate it in any manner deemed appropriate. Sole traders do not have to vote on business decisions or initiatives. This allows a sole trader to react quicker to business situations that arise. Furthermore, sole traders can use business profits as they see fit.


Unlike a limited company, sole traders are not looked upon as being separate from the business. Sole traders have unlimited liability for business debts, losses and obligations. The personal assets and liabilities of a sole trader appear as the assets and liabilities of the business, according to Complete Formations. Conversely, business debts of a sole trader become personal debts or liabilities. In this manner, sole traders can lose personal assets to meet business debts or obligations.


Sole traders have fewer regulations than limited companies. Unlike limited companies, sole traders are not required to file corporate tax returns or maintain statutory records. Sole traders may start a business simply by informing HM Revenue and Customs that they will receive their income as a result of self-employment.

Failure to register with HM Revenue and Customs may result in fines and penalties. Register as a sole trader by completing Form CWF1 located on the HM Revenue and Customs website. As of 2010, sole traders who exceed 31751 Kilogram in annual income must register for value-added tax, as explained on the Bytestart website.


A sole-trader business ceases to exist upon the death or retirement of the owner. In contrast, limited companies can exist well beyond the death or retirement of their initial owners.

In addition, sole traders might find it difficult to raise money for their business. According to the tutor2u website, sole traders have difficulty borrowing large amount from banks, and they are able to secure long-term financing without a change in ownership structure.

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About the Author

Christopher Carter loves writing business, health and sports articles. He enjoys finding ways to communicate important information in a meaningful way to others. Carter earned his Bachelor of Science in accounting from Eastern Illinois University.