The Sole Trader, is the simplest and most common form of private sector business. However, although there are many more sole traders than any other type of business, due to their size and respective turnovers the amount they contribute to total output in the UK is relatively small.

Essentially, a sole trader is a private individual, who provides all the permanent finance for the business, and in return has full control of the business, enjoying all the profits, and suffering all the losses that business makes.

There are few legal formalities required to set up a Sole Trader, and thus it is probably the cheapest form of business to set up. Exceptions to this rule are the Business Names Act (1985), and what has been termed the nuisance factor.

If the business intends to trade under a name other than that of its owner, it must ensure that all parties, that enter into transactions with the firm, are made aware of the name of the owner of the business.

If the business is one which might potentially cause nuisance if poorly run, such as a taxi firm or off-license, the business will normally be required to apply for a license to operate from the local council.

Finally as an unincorporated business, the owner / sole proprietor is seen legally as inseparable from the business, and thus can not limit their liability in respect of the debts of the business.

The nature of the Sole Trader provides therefore certain advantages and disadvantages which are listed in table 1, below.