Sole traders

A sole trader describes any business that is owned and controlled by one person - although they may employ workers. Individuals who provide a specialist service like plumbers, hairdressers or photographers are often sole traders.

A hairdresser typically works as a sole trader which means they make their own business decisions, work long hours and get to keep the profits

Sole traders do not have a separate legal existence from the business. In the eyes of the law, the business and the owner are the same. As a result, the owner is personally liable for the firm's debts and may have to pay for losses made by the business out of their own pocket. This is called unlimited liability.

Advantages

  • Easy to set up
  • Small capital investment means reduced start-up costs
  • Freedom to make decisions

Disadvantages

  • Responsibility
  • Long hours
  • Unlimited liability