7 Benefits of Being a Sole Trader in Business
Are you thinking of starting your own business? If so, you might be wondering what type of business structure is best for you. One of the most common and simple forms of business is a sole trader. A sole trader is a person who owns and runs their own business as an individual. They are not a separate legal entity from their business, which means they are responsible for all the profits, losses, debts and liabilities of their business.
But being a sole trader also has many benefits, especially for small and medium-sized businesses. Here are some of the advantages of being a sole trader in business:
1. You have full control over your business
As a sole trader, you are the boss. You can make all the decisions about how to run your business, what products or services to offer, how to market your business, and how to manage your finances. You don’t have to consult with anyone else or follow any rules or regulations that are not relevant to your business.
2. You have flexibility and freedom
As a sole trader, you can choose when and where to work, how much to charge, and who to work with. You can also change or adapt your business as you see fit, without having to worry about the impact on other partners or shareholders. You can also pursue your passion and creativity, and express your personality through your business.
3. You have lower costs and less paperwork
As a sole trader, you don’t have to pay any fees or taxes to register or maintain your business as a separate legal entity. You also don’t have to deal with complex accounting or reporting requirements, such as preparing financial statements, filing annual returns, or paying corporation tax. You only have to keep track of your income and expenses, and pay income tax and national insurance on your profits.
4. You have privacy and confidentiality
As a sole trader, you don’t have to disclose any information about your business to the public, unless you want to. You don’t have to register your business name or address, or publish any details about your finances or operations. You can also keep your personal and business affairs separate, and protect your trade secrets and intellectual property.
5. You have personal satisfaction and recognition
As a sole trader, you can take pride in your achievements and enjoy the rewards of your hard work. You can also build a reputation and a loyal customer base for your business, and receive direct feedback and appreciation from your clients. You can also establish yourself as an expert in your field, and showcase your skills and talents.
6. You have tax benefits and incentives
As a sole trader, you can claim various deductions and allowances for your business expenses, such as travel costs, equipment costs, home office costs, and professional fees. You can also use some of these expenses to reduce your taxable income, and pay less tax overall. You can also take advantage of some tax reliefs and schemes that are available for small businesses, such as the trading allowance, the cash basis scheme, and the simplified expenses method.
7. You have growth potential and opportunities
As a sole trader, you can expand or diversify your business as much as you want, without any limitations or restrictions. You can also collaborate or partner with other businesses or professionals, or hire employees or contractors to help you with your work. You can also access various sources of funding and support for your business, such as grants, loans, crowdfunding, or mentoring.
Being a sole trader in business has many benefits that can help you achieve your goals and dreams. However, it also comes with some challenges and risks that you need to be aware of and prepared for. For example, you need to have enough capital and cash flow to start and run your business, you need to comply with all the relevant laws and regulations that apply to your business, you need to protect yourself from any legal or financial liabilities that may arise from your business activities, and you need to plan for your retirement and succession.
If you are interested in becoming a sole trader in business, you should do some research and seek professional advice before making any decisions. You should also consider the pros and cons of other types of business structures, such as partnerships, limited companies, or cooperatives.
What is a sole trader?
A sole trader is a type of business structure where the owner and the business are the same legal entity. This means that the owner has full control over the business, but also bears all the risks and liabilities. A sole trader can operate under their own name or a registered business name, and can hire employees or contractors. A sole trader is also known as a sole proprietorship, individual entrepreneurship or proprietorship in some countries.
How is the global demand for sole traders?
The global demand for sole traders depends on various factors, such as the economic conditions, the market opportunities, the legal and regulatory environment, and the personal preferences of entrepreneurs. Some of the advantages of being a sole trader are the simplicity and low cost of setting up and running the business, the flexibility and autonomy of decision-making, and the tax benefits of being a pass-through entity. Some of the disadvantages are the unlimited liability for debts and losses, the difficulty of raising capital and accessing finance, and the lack of continuity if the owner dies or retires.
According to a report by FreshBooks, a cloud accounting software company, the number of self-employed workers in the US is expected to triple to 42 million by 2020, with millennials leading the way. The report also found that 61% of self-employed workers are happier than they were as employees, and 54% earn more money than they did before.
In contrast, a study by Simply Business, a UK-based insurance provider, revealed that 76% of UK sole traders have considered closing down their businesses due to the impact of the COVID-19 pandemic. The study also showed that 69% of sole traders have experienced a decrease in revenue, and 42% have struggled with their mental health.
These findings suggest that there is a high demand for sole traders in some markets and sectors, especially those that can adapt to the changing needs and preferences of customers in the digital age. However, there are also significant challenges and risks for sole traders in other markets and sectors, especially those that are affected by external shocks and uncertainties.
References:
http://mnpretail.com/wp-content/uploads/2015/08/MNP-soletrader-cs-08151.pdf
https://www.retailgazette.co.uk/blog/2020/07/soletrader-to-permanently-shut-8-uk-stores/
https://en.wikipedia.org/wiki/Sole_proprietorship
https://www.investopedia.com/terms/s/soleproprietorship.asp
https://www.collinsdictionary.com/dictionary/english/sole-trader
https://business.gov.au/planning/business-structures-and-types/business-structures/sole-trader
https://www.freshbooks.com/press/data-research/self-employment-report
https://www.simplybusiness.co.uk/knowledge/articles/2020/11/sole-traders-hit-hardest-by-covid-19/
https://www.gov.uk/set-up-sole-trader
https://www.startupdonut.co.uk/start-up-business-ideas/types-of-business/sole-trader
