If you are a sole trader then you are the sole owner of the business. Whilst the business can still employ other people, you do not share ownership or responsibility in any way. There is much less formal activity involved in establishing this type of business and it is probably the most common form of business start-up.
Sole traders take all of the risks and all of the profits. Generally, they will take money out of the business – referred to as ‘drawings’ – regularly throughout the year, although in fact all profit is theirs and will be taxed as personal income.
A sole trader is what is known as an ’unincorporated’ business. That means that all responsibility for the business and its debts lies with the owner. Liability is also unlimited, so if the business does badly, his or her home and personal assets are at risk.
Sole traders much register with HMRC, and there are specific rules around naming and running your business.