Sole traders

Question 1

explain a sole trader and a sole traders tax liability

Answer 1

= a person carrying on business in their personal capacity.

ST pays income tax & CGT

Question 2

what are the advantages? (4)

Answer 2

• No formation requirements so it is easier + less expensive to start
• Minimal formalities (i.e. must inform HMRC of the business + pay tax)
• No obligation to publicly disclose any information
• Complete control over the business

Question 3

what are the disadvantages? (4)

Answer 3

• No SLP so unlimited liability
• The business cannot hold assets in its name because no SLP
• ST also cannot take security out in the businesses’ name because no SLP
• Less reputable status than other business mediums