What is a sole trader? (How to register as a sole trader)

Whether being a graduate student or an opportunistic ambitious teen, anyone loves to open their business and start getting rich soon. Most common assumptions about working as an employer have a large office with thousands of employees roaming around and even lots of noise in the workplace. All of these challenges will say goodbye when we approach a special business model called “sole trader.”

What is a sole trader business? What does it require to get involved in the business model? In this article, we will answer some essential questions, including what is a sole trader and how to register as a sole trader easily.

What is a sole trader?

What is a sole trader? The sole trader meaning is something different from the idea we imagine while hearing the “trade” word. Simply, a sole trader is defined as a person who owns and runs their own business as an individual. A sole trader needs no legal identity as business ownership, so we can say that in our sole trader meaning, you are the business.

 what is a sole trader

Sole trading, also known as a sole proprietorship, has absolute control over its business, assets, and profits after-tax payment. Although many non-professional portions of people believe sole trading is a business with no other employees besides the owner, looking carefully at the sole trader meaning will reveal a significant structural difference between being a sole trader rather than working in traditional occupational fields.

What is a sole trader business?

Regardless of its chic title, sole trading is not a novel concept in history; the plumber you call for your leaky kitchen faucet or the hairdresser you visit for every party can be considered the explicit examples of a real sole trader.

What is a sole trader business? The top five characteristics of sole traders can be classified as the following;

  1. Control and identity realism

When you enter the world of proprietorship, you have sole ownership and full control over your business. There is no need to argue with your consultants or agree with the decision you are against deep in your heart; in fact, you are fully in charge of a wide range of business decisions.

As you know, any employed person has to maintain two personality identifications; one of them as his or her real character and another one for the time being at work. Sole trading has resolved this dilemma so that you are in the middle of all processes running in your business, and you and your business are considered one and the same.

  1. Continuity

The big difference between a sole trader and a factory owner is that the factory can be inherited by others come after the founder passes away, which is not true for an individual business. As a result, all activities can be ceased anytime due to the sole trader’s circumstances, such as illness, bankruptcy, or death.

  1. Unlimited liability

As you may have understood, sole traders are assumed to be responsible for all demands and debts an individual business can encounter. There is no limitation to the maximum amount of debt a sole trader is personally liable for. This can be a positive point for customers and coordinators and maybe bad news for the sole trader.

  1. Minimal filling requirements

Whenever you decide to complete an official process (such as applying for a job interview), you have to fill out tons of filling requirements asking about your status, abilities, and past performance. Fortunately, no paper and pen are waiting for you in sole trading, though you need to record your expense and income for the aim of the annual assessment tax return.

  1. Privacy

As a sole trader, you will experience a higher level of privacy compared with crowd company headquarters. Unlike limited company businesses, you are committed to publishing your business information to the public unless you try to attract new customers or achieve other personal goals.

What are the advantages of being a sole trader?

After we get familiar with what is a sole trader and the relative sole trader meaning, let’s have a better look at the pros and cons of operating as a sole trader. So many adventurous points can be counted for sole trading, making it an appealing target for business newbies.

  1. Ease of setting up

This can be the most direct positive fact about being a sole trader; no one can stop or slacken your intention for starting your first experience. All thing you need to do is tell the government you are self-employed and maybe get a license for what you are skilled at for formal purposes (HRMC’s license in the United Kingdom)

  1. Low setup costs

Most sole traders prefer to start their carrier with their personal laptops. If you are a Java developer or an IT consultant, you just need to choose a cozy place in your home as your tiny office and start generating assets. The setup costs for other sole trader occupations are much less than those of an official corporation.

  1. Higher level of privacy

When you register as a sole trader, there is no obligation to share your company’s essential details on official websites, such as the “House of Companies.” This is true because, in most countries, self-employment is managed separately from the official workplace, as we can see in HMRC.

  1. Ownership of profit

There are fewer partners when we talk about sole trading rather than in other conservative businesses, so you don’t have to pay or share profits with someone and, as such, enjoy sole control of the business profits.

  1. Easy to manage

The fewer people involved in a group, the less effort is required for management. Giant companies have to hire hundreds of supervisors, controllers, and experts to keep the gears of their trade smooth and lubricated. However, none of these is needed when you are the only manager and employee of your business.

  1. Easy to change the whole structure

Note that you are almost the only praiser and critic of your own business, so you can conveniently alter the main principles of your carrier without facing minimal resistance. If you think your performance is not lucrative, expensive, or requires some serious changes, just close your eyes and start the optimization.

  1. Less paperwork

As a limited company director, you will be needed to struggle with less paperwork compared with sophisticated system management. This is because your business isn’t a separate legal entity, and so there are fewer paper filing requirements. This will help you conduct your energy to your main goals and less waste it on boring paperwork.

What are the disadvantages of being a sole trader?

A white sky also has its own dark clouds, and this is true for sole trading. Although being a sole trader brings tons of opportunities, it can also contain some serious challenges. Whenever you register as a sole trader, you should keep an eye on what can make some difficulties throughout your business; most of them are listed below;

  1. Ultimate liability

As mentioned before, the sole trader is assumed to take responsibility for all financial processes happening during their career. This means that when you register as a sole trader, you automatically have accepted to pay all charges and debts from your personal revenue. If the business fails with debts to be paid, you will lose your income and have to pay the money owed from your assets, so even your car and house are in danger.

  1. Smaller target audience

We should confess that some customers are not likely to work with sole traders due to higher risks of cooperating. The restriction can even extend from your customers to your suppliers, as they may refuse to sell services or supply goods to a sole trader because of less credit a sole trader may have.

  1. Limited access to finance

Having partner(s) means budget size multiplication, but this does not happen while being a sole trader. As a sole trader, raising capital to expand the business cannot be easy. For example, banks often prefer to work with greater accounting transparency associated with official business groups compared with more private sole trader finance. Moreover, because of the higher risks often involved in sole trading, most banks and financial institutes are unwilling to lend large sums to sole traders.

  1. Poor work-life balance

One of the best answers to the question “what is a sole trader” could be “a diligent honeybee at day and a working owl at night.” Since all works fall on one person, the sole traders may not have the opportunity to have fun on holidays or even on sick leave. Honestly, sole trading is a 7/24 job, requiring an ever-increasing amount of time and energy, leaving little for family or social life.

  1. Perceived Lack of Prestige

Although this is often inaccurate, most people perceive sole traders as less professional and obsolete employers pretending to look nice in public. As a result, professional credibility may, in many cases, lead you away from working as a sole trader.

  1. Less idea sharing

Sole trading doesn’t necessarily mean you are unable to hire employees. However, almost all important decision makings will fall on you, and of course, no one is present to ask for advice. Many people prefer and work better in the form of a limited company, as they can use different skills and various resources. You may be a great manager and an ultra-expert in your field, but not comfortable when you are under pressure to keep all processes running simultaneously.

Is being a sole trader right for my business?

The next question after “what is a sole trader?” will be “is it worth to register as a sole trader?”

Statistically, sole traders with a particular skill have the most chance to have a better financial status in the future, as we see in knowledge-based companies. However, businesses that need a minimal budget and domestic jobs can also be performed under the sole trading model.

The fact is that being a sole trader is mostly just the first step of a bigger career, and our modern world’s giant factories and departments were just tiny workplaces or even sole trading models in the previous decades. Therefore, most sole traders are likely to raise their business, so they have to take some distance from the sole trading business model.

Sole trader challenges

The first challenge to being a sole trader is not their available revenue for starting; it is the motivation and desires the person has to keep themselves in the race. The world of business is the ocean of huge waves, which may smash your boat as you surf on it. Keep this in your mind; time as you lose the energy and idea needed for your business model, almost anything around your career will immediately be discontinued.

Since you are the only person in your workplace, you are committed to designing your plans and executing them on your own, which requires a high degree of self-management and discipline. Moreover, “self-confidence” is the next element a sole trader should have due to unlimited liability and responsiveness.

How to register as a sole trader?

The sole trader meaning doesn’t accompany with being totally free of any registration, as you also have to pay tax to the government.

To practically see how to register as a sole trader, we are looking carefully at the sole trader registration process in the UK (based on the official government website) in the following steps;

  1. Make sure you are the right person to be a sole trader. In this case, you may need to review the article “what is a sole trader” once again.
  2. Check for the rules while you are looking for a name to trade under. As a step further, you can apply for a trademark, too.
  3. Next, check for the records you will need to keep as an employer. Most small businesses have an annual income of 150,000 pounds or less. You can use the “cash basis reporting” system if you are one of them.
  4. Now, you should register for tax. To pay tax, you will need to register for “Self Assessment.” If you don’t have a national insurance number, you have to apply for it. Check for the criteria mentioned on the official website, so it can tell if you need to also apply for VAT for your business.


Thank you for reading. We have answered all critical questions about sole trading, including “what is a sole trader,” the sole trader meaning, and “how to register as a sole trader” precisely in our text.

As a piece of advice, knowing what is a sole trader is important; but ensuring “am I deserve to be a sole trader” is more essential. Sole trading is a very difficult kind of job career you can find among others, so only brave hearts can successfully pass the way.

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