What you should know
Being a sole trader is the simplest way to run a one-person business, and does not involve paying any registration fees. Keeping records and accounts is straightforward, and you get to keep all the profits. But you are personally liable for any debts that your business runs up, which can make this a risky option for businesses that need a lot of investment.
Set-up
Management and raising finance
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You make all the decisions on how to manage your business.
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You raise money for the business out of your own assets, and/or with loans from banks or other lenders.
Records and accounts
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You have to make an annual self-assessment return to the Inland Revenue.
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You must also keep records showing your business income and expenses.
Profits
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Any profits go to you.
Tax and National Insurance
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As you are self-employed, your profits are taxed as income. You need to pay fixed-rate Class 2 National Insurance contributions (NICs) and Class 4 NICs on your profits.
Liability
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As a sole trader, you are personally responsible for any debts run up by your business. This means your home or other assets may be at risk if your business runs into trouble.