What is a Sole Trader? | All you need to know about

Starting your own business by yourself is one of the most critical decisions you make. Although the risks are high, however, but the rewards are excellent. The most significant benefit is that “you are boss of your ownself” and it allows you to begin and manage your own business without involving other partners.

What exactly is a Sole Trader?

The sole trader is also termed a sole proprietor or an entrepreneur. A sole trader is one individual who owns, runs, manages, and controls the whole business. A sole proprietor is a self-employed person who has the authority to keep the entire after-tax profit and is also accountable for any losses the business suffers. The sole proprietorship does not involve other partners and shareholders, but the business entirely belongs to just a single person.

The sole trader gives owners the plus point to start or stop the business at any moment. Because only the proprietor is solely responsible for all the business decisions. For sole proprietorships, accounting and paperwork are relatively simple, which allows them to get up and running in a matter of days quickly.

What are the Responsibilities of Sole Traders?

• A successful sole trader must be able to excel in every aspect of running a business. They must have complete knowledge and understanding of running a business independently.
• They are responsible for managing operations, recording accounts and finances , answerable for liabilities, filing tax returns, and managing expenses, sales, and profits.
• They understand creating a business strategy and the ability to follow an overall business plan to increase their sales base.
• An entrepreneur can establish supply chains, handle inventory, recruit and educate employees, and then organize employees to serve customers efficiently.
• They get benefits from their business decision-making. However, they are accountable for managing the workload within the set timeframe.
• Another duty of a sole proprietor is to follow established businesses’ practices, rules, and guidelines.
• Sole proprietors must notify and register their business place with local authorities to get the proper documents and permits.
• Sole proprietors who hire employees, are accountable for submitting tax returns on the earnings of employees. Also, they are responsible for ensuring that employees are provided with decent working conditions and benefits and compensations.
  
  

What to consider to Set up as a Sole Trader?

If you'd like to operate independently, make a business strategy first. Utilize your market research to help you establish your goals for your business. Create a vision and mission statement describing your business ambitions and objectives. The most crucial aspect for any business is to know the people you want to target. You must be aware of the nature of your business and the competitors you are competing with. If you're not done with your research, it will appear on your business plan. Find out the specifics of what your business is about. What would be the name? How will your business operate? What would be the costs and tax assessments? These questions could be among the advantages of making a business strategy; they will also help you resolve problems before they occur.

Once you have gathered all of the information, based on the facts and figures, it's time to come up with making the budget. After subtracting variable and fixed costs from your income and expenses, you can determine how much you'll have to spend. Prepare yourself for unanticipated costs; in this way, you will be able to discover ways to utilize your money effectively to meet your short-term and long-term objectives.

What are the Advantages of being a sole trader?

• Freedom: This is a massive perk of running your own business solely as you like. However, you are responsible for your actions and not answerable to anyone for anything.

• Control: An entrepreneur has complete authority over all business operations. They own all profits, debts, or losses that could incur in business.

• Finance: Sole proprietorship allows making more money with no obligation to distribute the earnings among others. Moreover, the accounts and financial information of the business are kept in privacy.

• Flexibility: Unlike other corporate structures, you don't have to consult directors, shareholders, or partners. You can make choices on your own and quickly respond with flexibility and adaptability to changing customer demands and business environments.

• Less Legal Requirements: A sole proprietorship requires fewer legal formalities and paperwork than a limited company. It is easy to set up without involving in expensive and complicated legalities.
  
  

Disadvantages of Being a Sole Trader

Beginning as a sole proprietor gives you an opportunity for flexibility, lower starting expenses, and is less complicated. Starting as a sole trader is a great option, but there are disadvantages as well.

• Unlimited Liabilities: sole traders are personally liable for all debts, losses, taxes, and other expenses. In the worst case, their assets can be possessed to pay off their outstanding debts.

• Multiple roles: Being a sole trader, it can be complicated and hectic to get involved simultaneously in various tasks. Sometimes it's not wise to control every job yourself. If you're feeling self-indulgent and unable to concentrate on your finances, consider consulting an online accountant so as not to compromise on money matters.

• Overburden: This could include a list of things you must regularly finish weekly/monthly. With the freedom to make business decisions, you also have to manage the bulk of assignments on time.
  
  

How can Anderson Ross help your Sole Trading Business?

Anderson Ross is more than an accounting and finance firm. We have the experience and expertise to help you make your life easier by educating you on your options and reducing the burden of self-assessments and tax returns while allowing you to focus on other business operations. Anderson Ross can help you enhance your knowledge of business start-ups , financial planning, and decision-making capabilities.

Anderson Ross can help build a strong relationship with your potential clients. We can provide a service of sole trader QuickBooks that can assist in keeping accounts for small businesses and startups. However, we serve as a financial adviser and share our industry expertise, by ensuring that we will surely be remembered as a trustworthy resource that can be relied upon.

Speak to our financial adviser today!