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Starting a business can be a challenging yet rewarding experience. One of the key decisions that entrepreneurs face is choosing the right business structure. Among the various options available, the sole trader business structure is a popular choice, especially for small businesses. Want to find out more? Read on!A sole trader or sole proprietor is someone who establishes and operates…
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Starting a business can be a challenging yet rewarding experience. One of the key decisions that entrepreneurs face is choosing the right business structure. Among the various options available, the sole trader business structure is a popular choice, especially for small businesses. Want to find out more? Read on!
Sole trader definition
A sole trader or sole proprietor is someone who establishes and operates a business on their own.
This individual sole trader is responsible for all aspects of the business, including making decisions, managing finances, and assuming liability for any debts or legal issues that may arise. It is a straightforward and flexible business structure that offers the owner complete control over their company. It is an excellent option for individuals who are just starting out and want to keep their business operations simple and manageable.
Operating as a sole trader
People operating a sole trader business work for themselves. Sole traders can hire other people to work with them; However, the only person responsible for the business is the individual operating as a sole trader. They are responsible for all overall business activities and are actively involved in running the business.
The characteristics of a sole trader include:
Confidence : to make decisions and take responsibility for your decisions.
Specialised skills : to succeed at what they do (i.e., plumbing, graphic design, or cutting hair).
Managerial skills : to run the business and keep updated business records.
Flexibility : for carrying out tasks like contacting clients or keeping in touch with manufacturers.
Self-discipline : all business activities are in their own hands. They do not report to an executive, which also means that they do not get advice from anyone.
Motivation : the business will fail to operate unless the sole trader puts in time and effort.
Sole trader benefits
Operating as a sole trader offers several benefits, including:
- being your own boss;
- you have complete control over decision-making;
- it is easy and cheap to set up;
- you have full control over the profits.
These benefits can make the sole trader business structure an ideal option for individuals who want to start a small business and have complete autonomy in decision-making and management .
In the UK, sole traders can start trading as soon as they wish, as there is no need to set up the business officially with a government establishment. As long as a sole proprietor declares their profits to the HMRC (Her Majesty's Revenue and Customs), they are all set up. It is important to declare profits in order to be taxed appropriately.
Sole trader disadvantages
While operating as a sole trader has many benefits, it is important to consider the potential drawbacks.
Some of the major disadvantages of this business structure include the following:
- Unlimited liability , which means that the sole trader is personally responsible for all the debts and losses incurred by the business, including the risk of losing personal assets in the case of bankruptcy or inability to repay loans
- Lack of support and guidance , as the sole trader must handle all aspects of the business, including dealing with problems and managing finances
- Working primarily on your own , which can lead to feelings of isolation, especially during periods of stress, and can make it difficult to manage time effectively. You can also risk losing customers and profits if you take time off and close your business.
- Limited access to funds, which can make it challenging to grow the business. Often sole traders do not have enough funds for expansion, as they need to use their own money if they wish to grow their business. It is possible for a sole trader to take out a loan, but this can be tricky sometimes, as banks may charge high-interest rates because of the risk of the sole trader not being able to repay their debts on their own.
Unlimited liability is essentially the opposite of limited liability .
It is important to carefully weigh these factors before deciding whether the sole trader business structure is the right choice for you.
Sole trader advantages and disadvantages summary
To summarise the advantages and disadvantages of operating as a sole trader, we have prepared this table:
Sole trader examples
It is a relatively popular form of business. There are various types of occupations you can have as a sole trader. Sole trader examples include:
Tradespeople : plumbers, electricians, or gardeners.
Freelance workers : graphic designers, web designers, photographers, or artists.
Independent contractors : tutors, food delivery drivers, couriers.
Setting up as a sole trader
Operating as a sole trader is a fast and simple way of offering your services. As an example, let's take a look at Chloe, who is a freelance copywriter. As a copywriter, Chloe writes articles and blog posts for companies, promoting their products and services, encouraging readers to visit their websites. She enjoys reaching out to clients, networking, and setting up her own schedule. Chloe sets up a sole proprietorship so she can enjoy flexible working hours, make her own decisions about her business, and has the freedom of not having to report to a manager.
Her business can respond directly to the needs of her clients, engage with them on a personal level, and make decisions freely about the number of clients she takes on. Although Chloe can make all these decisions on her own, it does not mean that she will always make the right decisions for her business. Sole proprietors need to be careful and approach their operations from a managerial perspective. Otherwise, they risk losing track of their goals.
Sole Trader - Key takeaways
- A sole trader or sole proprietor is a business that is owned and managed by one person.
- A sole trader is confident about making decisions on their own; has specialised and managerial skills; and is motivated, flexible, and can manage their time efficiently.
- An important factor to consider when setting up a sole trader is unlimited liability, meaning the individual is solely responsible for all problems and losses that the business incurs.
- There is no distinction between the individual (sole trader) and the business.
- There are several benefits and potential falls of a sole trader.
Frequently Asked Questions about Sole Trader
--> what is a sole trader.
A sole trader or sole proprietor is someone who establishes and operates a business on their own.
--> Can a sole trader have employees?
Sole traders can hire other people to work with them; However, the only person responsible for the business is the individual operating as a sole trader.
--> How to become a sole trader?
To become a sole trader, a person should have the following charateristics.
--> What sources of finance are available to a sole trader?
Sources of finance available for a sole trader include:
- personal savings,
- bank loans,
- sale of assets,
- retained profit.
--> What are the features of a sole trader?
Features of a sole trader are attributes that make it different from other types of business and include:
- ease of setting up,
- ability to set your own schedule,
- quick decision-making, or
- flexibility in managing finances
Final Sole Trader Quiz
Sole trader quiz - teste dein wissen.
What is the definition of a sole trader?
A sole trader is a business that is owned and managed by one person. People operating a sole trader business work for themselves and are responsible for all business activities and decisions involved in running the business.
What is another term for a sole trader?
A sole proprietor. The terms 'sole trader' and 'sole proprietor' are synonymous.
Define unlimited liability.
Unlimited liability is when an individual is personally responsible for all the actions of their business. For a sole trader there is no distinction between the individual and the business. This means that the individual is personally responsible for their business losses and problems. For instance, if a sole proprietor borrows money from a bank and cannot repay their debt, they may risk losing personal possessions.
Which one of the following is not a common characteristic of a sole trader?
Confident in making decisions
Has business and management skills.
Can manage their time effectively.
Reports directly to their manager.
One of the main disadvantages of a sole trader is:
It is very complicated to set up and register.
It can get quite lonely working on your own.
You have direct contact with clients, making it hard to keep up with all the communication.
You rely on your employees for a lot of different business procedures.
Why would someone choose to operate as a sole trader rather than work for a company?
Flexible working hours.
Ability to make all decisions without having to report to a manager.
Being 'your own boss'.
Direct relation to the market and clients.
Does operating as a sole trader mean that a business will always be able to make the right decision?
No, this is not true. A sole trader has the freedom to make all decisions on their own without the involvement of a manager or other team members. However, this does not mean that a sole trader will always make the correct decision for their business. It is easy to get demotivated, lack appropriate time management skills and become disorganized when you are working without supervision and the guidance of others.
Does operating as a sole trader mean that you cannot hire anyone to help you with certain tasks?
No, as a sole trader it is possible to hire employees. However, it is the sole trader's responsibility to make the right decisions when hiring help, as they are personally liable for all the operations and actions of their business.
Does operating as a sole trader mean that you are not allowed to take out a loan from the bank?
As a sole trader, it is possible to borrow money from a bank or other financial institutions. However, it could be disadvantageous to do this since they often charge high interest rates. Banks do this because they are worried about the sole trader being able to repay their debts in case of failure.
Which one of the following is not a benefit of operating as a sole trader?
Easy to set up.
Quick and efficient decision-making process.
Keeping all the profits the business makes.
Is it true that there are no downfalls to operating as a sole trader?
No, this is not true. The disadvantages of a sole trader include:
The risk of losing customers if you take time off
Pressure to deal with everything by yourself
The sole responsibility for all business-related decisions
The loneliness of working alone.
Is it true that by hiring an employee, they are also responsible for the actions and decisions of the sole trader?
No, the sole trader is individually and solely responsible for all the actions and decisions they make.
Name some of the disadvantages of the freedoms a sole trader experiences.
One of the advantages of a sole trader is that they can set their schedule and work flexibly. However, this can result in the sole trader having to work long hours and not being able to take any holidays.
Name three examples of a sole trader.
Several different types of jobs are suitable for a sole trader:
Name and outline an example of someone who would want to set up a sole trader.
An example of someone who would want to set up as a sole trader would be a freelance copywriter. They would enjoy the benefits of managing their own schedule, making their own business decisions and the freedoms that come with being their 'own boss'. Their business can respond directly to the needs of her clients, engage with her clients on a personal level, and make decisions freely on the number of clients they take on.
People operating a sole trader business work for...
Which are the characteristics of a sole trader?
To whom do UK sole traders have to declare their profits?
HMRC (Her Majesty's Revenue and Customs)
Why is it important for sole traders to declare their profits?
Sole traders need to declare profits in order to be taxed appropriately.
Sole traders are able to keep all profits from the business.
One main advantage of being a sole trader is to enjoy certain freedoms other office workers cannot.
What is not a benefit of being a sole trader?
Easy to set up
What are the disadvantages of being a sole trader?
Risk of losing customers if you take time off
Plumbers, electricians, and gardeners are examples of freelance workers
Give examples of freelance workers
graphic designers, web designers, photographers, or artists
Tutors, food delivery drivers, and couriers are referred to as independent workers.
A sole trader is someone who ...
owns and manages the business by his/herself
What are the managerial skills required for a sold trader?
Skills to run the business and keep updated business records.
Sole traders cannot hire other people to work for them.
What would happen if the solder trader runs out of money for operations?
They need to use their own money if they wish to continue the business. It is also possible for a sole trader to take out a loan, but this can be tricky sometimes, as banks may charge high-interest rates because of the risk of the sole trader not being able to repay their debts on their own.
- Influences on Business
- Business Development
- Organizational Behavior
- Nature of Business
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- Sole Proprietorship
- How it Works
- Pros and Cons
- How to Create One
- S.P. vs. LLC vs. Partnership
- Transition to LLC
The Bottom Line
Sole Proprietorship: What It Is, Pros & Cons, Examples, Differences From an LLC
Investopedia / Theresa Chiechi
What Is a Sole Proprietorship?
A sole proprietorship is an unincorporated business that has just one owner who pays personal income tax on profits earned from the business. Many sole proprietors do business under their own names because creating a separate business or trade name isn’t necessary.
Also referred to as a sole trader or a proprietorship, a sole proprietorship is the easiest type of business to establish or take apart, due to a lack of government regulation. As such, they are very popular among sole owners of businesses, individual self-contractors, and consultants. Most small businesses start as sole proprietorships and either stay that way or expand and transition to a limited liability entity or corporation .
- A sole proprietorship is an unincorporated business with only one owner who pays personal income tax on profits earned.
- Sole proprietorships are easy to establish and dismantle due to a lack of government involvement, making them popular with small business owners and contractors.
- Most small businesses start as sole proprietorships and end up transitioning to a limited liability entity or corporation as the company grows.
- One of the main disadvantages of sole proprietorships is that they do not have any government protection, as they are not registered. This means that all liabilities extend from the business to the owner.
- Sole proprietors report their income and expenses on their personal tax returns and pay income and self-employment taxes on their profits.
Understanding a Sole Proprietorship
If you want to start a one-owner business, the simplest and fastest way is through a sole proprietorship. Sole proprietorship begins when you begin conducting business. It doesn’t require filing federal or state forms and has few regulatory burdens, making it an ideal way for self-employed people to start out.
A sole proprietorship is very different from a corporation, a limited liability company (LLC) , or a limited liability partnership (LLP) , in that no separate legal entity is created. As a result, the business owner of a sole proprietorship is not exempt from liabilities incurred by the entity.
For example, the debts of the sole proprietorship are also the debts of the owner. However, the profits of the sole proprietorship are also the profits of the owner, as all profits flow directly to the business owner.
Sabrina Jiang © Investopedia 2020
Advantages and Disadvantages of a Sole Proprietorship
The main benefits of a sole proprietorship are the pass-through tax advantage, the ease of creation, and the low fees for creation and maintenance.
- The tax benefits. Income generated from a pass-through business is only subject to a single layer of income tax and, in some cases, may be eligible for a 20% tax deduction. Along with slashing the corporate tax rate, the Tax Cuts and Jobs Act (TCJA) of 2017 added a tax break for pass-through entities that essentially allows them to deduct up to 20% of qualified business income. That deduction can result in huge savings and runs until Jan. 1, 2026—unless extended by Congress.
- With a sole proprietorship, you do not need to fill out a tremendous amount of paperwork, such as registering with your state. You may need to obtain a license or permit, depending on your state and type of business. But less paperwork allows you to get your business off the ground faster.
- The tax process is simpler because you do not need to obtain an employer identification number (EIN) from the Internal Revenue Service (IRS) . You can obtain an EIN if you choose to, but you can also use your own Social Security number (SSN) to pay taxes rather than needing an EIN.
- With a sole proprietorship, you also don’t need a business checking account , as other business structures are required to have. You can simply conduct all your finances through your personal account.
The number of small businesses in the United States in 2022. Together, these businesses employed 61.7 million people across the country.
The following are some of the most common disadvantages of sole proprietorships.
- When a business is registered, it has some legal protections. For example, a sole proprietorship provides no liability protection to the owner. By contrast, an LLC has protection against creditors seizing the owner’s personal assets, such as their home.
- The unlimited liability that goes beyond the business to the owner and the difficulty in getting capital funding, specifically through established channels, such as issuing equity , bank loans, or lines of credit. Banks prefer to work with companies that have a track record and generally view those who are starting out with a small balance sheet as high-risk borrowers. Obtaining equity from large investors can also be difficult.
No need to obtain an EIN from the IRS
Quick and easy setup compared with other business structures
Low fees and costs
Pass-through tax advantage
Unlimited liability goes from business to owner
Difficulty in raising capital
How to Create a Sole Proprietorship
It isn't very difficult to start a sole proprietorship. That's because there aren't the usual legal hurdles that you have to overcome with other types of business organizations . In most cases, starting the entity is as easy as establishing yourself as the owner and starting up. Depending on where you live, there are certain steps you can take to formally launch your sole proprietorship.
- Get your business license and any permits you may need. Some states require that you apply for licenses (business or occupancy) as well as permits. Check with your state or county clerk to see if you need any special paperwork to begin your business.
- You may need to register your business under its Doing Business As name if your state requires it. If this isn't the case, you can operate under an assumed name, which can usually just be your own. Keep in mind that there are legal ramifications if you choose to run your sole proprietorship under your name.
- Apply for and obtain an EIN. This is an important and necessary step if you're going to have any employees or file tax returns. If this doesn't apply to you, you're able to use your own SSN. Either way, it's always a good idea to check with a tax advisor so you don't make any mistakes.
If you plan to hire employees, you will need an EIN from the IRS. If you are going to sell taxable products, you will need to register for a sales tax license with your state.
Sole Proprietorship vs. LLC vs. Partnership
As noted above, there are certain distinctions between a sole proprietorship and a limited liability company and a partnership. The chart below highlights some of the key differences between the three.
Transition from Sole Proprietor to LLC
When a sole proprietor seeks to incorporate a business, the owner usually restructures it into an LLC. For this to work, the owner must first determine that the name of the company is available. If the desired name is free, articles of organization must be filed with the state office where the business will be based.
After the paperwork is filed, the business owner must create an LLC operating agreement, which specifies the business structure. Finally, the new company must obtain an EIN—similar to an SSN, but for businesses—from the IRS.
A sole proprietorship has no separation between the business entity and its owner, setting it apart from corporations and limited partnerships.
Sole Proprietorship Tax Forms
Sole proprietors report their income and expenses on their personal tax returns and pay income and self-employment taxes on their profits. The tax forms you may need to file could include the following:
Example of a Sole Proprietorship
Most small businesses start as sole proprietorships and evolve into different legal structures as time passes and the company grows.
For example, Kate Schade started her company, Kate’s Real Food, as a sole proprietor. The company creates and sells energy bars and began as a local vendor in Jackson Hole, Wyoming. The sole proprietorship currently has a production facility in Bedford, Pennsylvania, and can be found in more than 4,000 retailers.
Since launching in 2005, Kate’s Real Food has grown to supply accounts across the country. In response, Schade restructured the business from a sole proprietorship to a corporation to take on investments and expand, a natural step for a growing business.
How Do You Start a Sole Proprietorship?
To start a sole proprietorship, you generally have to launch your business. It is useful to choose a company name. Depending on your business and local regulations, you may need to apply for a permit or license with your city, county, or state. If you plan to hire employees, you will need an employee identification number from the IRS. If you are going to sell taxable products, you will need to register with your state for a sales tax license.
Is Being Sole Proprietorship the Same as Being Self-Employed?
Yes, being a sole proprietor is the same as being self-employed. A sole proprietor does not work for any company or boss, so they are self-employed.
How Do You File Taxes as a Sole Proprietor?
Filing taxes as a sole proprietor requires you to fill out the standard tax Form 1040 for individual taxes and Schedule C, which reports the profits and loss of your business. The amount of taxes you owe will be based on the combined income of both Form 1040 and Schedule C. If you have employees, there will be other forms to fill out.
Should I Form a Limited Liability Company or a Sole Proprietorship?
That depends on your business. A sole proprietorship is best suited to small businesses with low risk and low profits. Generally, these businesses don’t have a wide range of customers but rather a small, dedicated group. Sole proprietorships often start as hobbies that grow into a business.
The reasons to start a limited liability company (LLC) are the opposite of the reasons above. The business entails some liability risks , has the potential for large profits and a large customer base, and is positioned to benefit from certain tax structures.
How Do You Convert a Sole Proprietorship to an LLC?
Converting a sole proprietorship to an LLC requires you to file articles of organization with your state secretary. Also, you will have to refile your DBA (or doing business as) to keep your company name. Lastly, you will need to obtain an EIN from the IRS.
A sole proprietorship is a straightforward way for an individual to start a business. It does not require registering with a state authority for most situations and does not require obtaining an EIN from the IRS.
The benefits of simplicity are accompanied by some drawbacks, including all liabilities being passed through from the business to the individual and funding being harder to come by. Those risks shouldn’t pose much of an issue initially. However, as the business grows, it may make sense to transition into a different legal structure.
Internal Revenue Service. “ Topic No. 407 Business Income .”
Internal Revenue Service. “ Qualified Business Income Deduction .”
Internal Revenue Service. “ Form SS-4 & Employer Identification Number (EIN) 1 .”
U.S. Small Business Administration Office of Advocacy. “ 2022 Small Business Profile .”
Internal Revenue Service. “ Do You Need a New EIN? ”
Kate’s Real Food. “ About Us .”
Jackson Hole News & Guide. “ Tram Good: Local Product Goes National .”
Internal Revenue Service. “ Sole Proprietorships .”
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- What Is Commercialization, Plus the Product Roll-Out Process 33 of 46
- Digital Marketing Overview: Types, Challenges, and Required Skills 34 of 46
- Direct Marketing: What It Is and How It Works 35 of 46
- Marketing in Business: Strategies and Types Explained 36 of 46
- What Are Marketing Campaigns? Definition, Types, and Examples 37 of 46
- How to Do Market Research, Types, and Example 38 of 46
- Micromarketing Explained: Definition, Uses, and Examples 39 of 46
- Network Marketing Meaning and How It Works 40 of 46
- Product Differentiation: What It Is, How Businesses Do It, and the 3 Main Types 41 of 46
- Target Market: Definition, Purpose, Examples, Market Segments 42 of 46
- Outside Sales: What They are, How They Work 43 of 46
- What Is a Sales Lead? How It Works and Factors Affecting Quality 44 of 46
- Indirect Sales: What it is, How it Works 45 of 46
- What Is Inside Sales? Definition, How It Works, and Advantages 46 of 46
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Example business plans
Put together your business plan with our tips.
Where can I find an example of a business plan?
If you’re preparing to write your first business plan and are looking for some useful resources and advice on what elements to include you have come to the right page.
It is essential to have a realistic, working business plan when you’re starting up a business. We have our own section devoted to business planning where there are lots of articles and links to information on writing business plans . The content can show you how to prepare a high quality plan using a number of easy-to-follow steps but also contains more specialist information to help you really fine tune your document, plus advice on presentation and targeting.
If you are specifically looking for advice as a franchisee, check out our article on the 11 things you need to include in a franchise business plan .
There are a range of other sources you may also want to use. An often overlooked source is your Bank who may well have information, examples and templates of business plans:
- Barclays template and checklist [pdf]
- Lloyds sample plan [downloadable pdf – see section 4]
The Prince’s Trust offers downloadble pdf, MS Word and Excel templates . They also offer personal advice on completing a plan through their Enterprise programme if you are selected to work with them.
Slideshare has lots of business plans uploaded, which you can browse through here . We liked this thorough 26 page example from The Business Plan Team , as well as a template created by former Deloitte Management Consultants here , and a good example of a colourful, visual plan suitable for a trendy food business here .
An interesting interactive free business plan creator is offered by LawDepot . On the website you are stepped through 7 simple steps using a well-designed graphic interface, and at the end you can output the subsequent plan ready to fill in. There are 12 industries to choose from and it has sections for company structure, product, marketing, SWOT, operations and ‘Fine Details’.
Other Web Resources: Business Plan Templates
You can find examples of business plans for different types of businesses at:
- ACCA – the Association of Chartered Certified Accountants have 3 example business plans for three different business sectors: Cafe, Import Business, UK Ltd business seeking finance.
- Bplans – owned and operated by Palo Alto Software Inc., the site has free plans to download and it also has examples for lots of different types of individual or specific market sectors.
- Expert Hub – based in South Africa, this site has 21 example business plans for different categories.
- Start Up Loans – offer a downloadable .docx template.
- Invest Northern Ireland – have a .doc business plan template to download here
- StartUps.com – have four sample plans that you can access from Google Drive (note, this is a USA site so the examples are US-based, although the formats could still work for a UK business).
- Examples.com – 20+ example downloadable .pdf plans for different sectors.
Finally, how about a video on the subject? Quite a few examples on Youtube.
How about this one from Craig Frazier?
Further reading on business plans:
- Advice and the basic tips of writing a business plan
- A check list of what should be in your business plan
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Business Ideas & Planning
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- Business Plans
Simple Business Plan Template for Entrepreneurs
Follow This Business Plan Outline to Write Your Own
Susan Ward wrote about small businesses for The Balance for 18 years. She has run an IT consulting firm and designed and presented courses on how to promote small businesses.
Pros and Cons of Using a Business Plan Template
Do i need a simple or detailed business plan, how to use this business plan template, table of contents, section 1: executive summary, section 2: business/industry overview.
- Section 3: Market Analysis and Competition
Section 4: Sales and Marketing Plan
Section 5: ownership and management plan, section 6: operating plan, section 7: financial plan.
- Section 8: Appendices and Exhibits
Ariel Skelley / Getty Images
Think you have a great idea for a business? The best way to find out whether your idea is feasible is to create a business plan .
A solid, well-researched business plan provides a practical overview of your vision. It can be used to ground your ideas into workable actions and to help pitch your idea to financial institutions or potential investors when looking for funding.
The standard business plan consists of a single document divided into several sections for distinct elements, such as a description of the organization, market research, competitive analysis, sales strategies, capital and labor requirements, and financial data. Your plan may include more or fewer sections to best represent your business.
The template presented here will get you well on your way toward your simple business plan.
Generic, not customized
No financial guidance
Additional skills needed
- Ready-made layouts : Templates offer general guidance about what information is needed and how to organize it, so you’re not stuck looking at a blank page when getting started. Especially detailed templates may offer instructions or helpful text prompts along the way.
- Variations : If you know what type of business plan you need—traditional, lean, industry-specific—chances are you can find a specialized template.
- Free downloads : There are many free business plan templates available online, which can be useful for comparing formats and features, or refining your own.
- Generic, not customized : Templates typically contain just the basics, and there will still be a lot of work involved to tailor the template to your business. For instance, you'll have to reformat, refine copy, and populate tables.
- No financial guidance : You’ll need enough industry knowledge to apply financial models to your specific business, and the math skills to generate formulas and calculate figures.
- Additional skills needed : Some degree of tech savvy is required to integrate charts and graphs, merge data from spreadsheets, and keep it all up-to-date.
A corporate business plan for a large organization can be hundreds of pages long. However, for a small business, it's best to keep the plan short and concise, especially if you're submitting it to bankers or investors . Around 35 to 50 pages should be sufficient, and more allowed for extras, such as photos of products, equipment, logos, or business premises or site plans. Your audience will likely prefer solid research and analysis over long, wordy descriptions.
An entrepreneur who creates a business plan is nearly twice as likely to secure financing and grow their business compared with those who do not have a plan.
The business plan template below is divided into sections as described in the table of contents. Each section can be copied into a document of your own; you may need to add or delete sections or make adjustments to fit your specific needs.
Once complete, be sure to format it attractively and get it professionally printed and bound. You want your business plan to convey the best possible impression. Make it engaging, something people will to want to pick up and peruse.
Enter your business information, including the legal name and address. If you already have a business logo, you can add it at the top or bottom of the title page.
- Business Plan for "Business Name"
- Business address
- Website URL
If you're addressing it to a company or individual, include:
- Presented to "Name"
- At "Company"
- Executive Summary................................................Page #
- Business/Industry Overview.................................Page #
- Market Analysis and Competition.........................Page #
- Sales and Marketing Plan.......................................Page #
- Ownership and Management Plan.......................Page #
- Operating Plan..........................................................Page #
- Financial Plan............................................................Page #
- Appendices and Exhibits........................................Page #
The executive summary introduces the plan, but it is written last. It provides a concise and optimistic overview of your business and should capture the reader's attention and create a desire to learn more. The executive summary should be no more than two pages long, with highlights or brief summaries of other sections of the plan.
- Describe your mission —what is the need for your new business? Sell your vision.
- Introduce your company briefly, sticking to vital details such as size, location, management, and ownership.
- Describe your main product(s) and/or service(s).
- Identify the customer base you plan to target and how your business will serve those customers.
- Summarize the competition and how you will get market share. What is your competitive advantage?
- Outline your financial projections for the first few years of operation.
- State your startup financing requirements.
This section provides an overview of the industry and explains in detail what makes your business stand out.
- Describe the overall nature of the industry, including sales and other statistics. Note trends and demographics, as well as economic, cultural, and governmental influences.
- Explain your business and how it fits into the industry.
- Mention the existing competition, which you'll expand upon in the following section.
- Identify what area(s) of the market you will target and what unique, improved, or lower-cost products and/or services you will offer.
Many business plans cover their products/services in a standalone section to add more detail or emphasize unique aspects.
Section 3: Market Analysis and Competition
This section focuses on the competitive factor of your business and justifies it with financial models and statistics. You need to demonstrate that you have thoroughly analyzed the target market, assessed the competition, and concluded that there is enough demand for your products/services to make your business viable.
- Define the target market(s) for your products/services in your geographic locale.
- Explain the need for your products/services.
- Estimate the overall size of the market and the units of your products/services that the target market might buy. Include forecasts of potential repeat-purchase volume and how the market might be affected by economic or demographic changes.
- Estimate the volume and value of your sales in comparison with any existing competitors. Highlight any key strengths over the competition in easily digestible charts and tables.
- Describe any helpful barriers to entry that may protect your business from competition, such as access to capital, technology, regulations, employee skill sets, or location.
You may opt to split the target market description and competitive analysis into two separate sections, if either (or both) portray your business especially favorably.
Here's where you dive into profits, giving detailed strategic view of how you intend to entice customers to buy your products and/or services, including advertising or promotion, pricing, sales, distribution, and post-sales support.
Product or Service Offerings
If your products and/or services don't take up a standalone section earlier in the plan, here is where you can answer the question: What is your unique selling proposition? Describe your products and/or services, how they benefit the customer and what sets them apart from competitor offerings.
How will you price your products/services? Pricing must be low enough to attract customers, yet high enough to cover costs and generate a profit. You can base pricing decisions on a number of financial models, such as markup from cost or value to the buyer, or in comparison with similar products and/or services in the marketplace.
Sales and Distribution
For products, describe how you plan to distribute to the customer. Will you be selling wholesale or retail? What type of packaging will be required? How will products be shipped? If you offer a service, how will it be delivered to the customer? What methods will be used for payment?
Advertising and Promotion
List the various forms of media you will use to get your message to customers (e.g., website, email, social media, or newspapers). Will you use sales promotional methods such as free samples and product demonstrations? What about product launches and trade shows? Don't forget more everyday marketing materials such as business cards, flyers, or brochures. Include an approximate budget.
This section describes the legal structure, ownership, and (if applicable) management and staffing requirements of your business.
- Ownership structure : Describe the legal structure of your company (e.g., corporation, partnership, LLC, or sole proprietorship ). List ownership percentages, if applicable. If the business is a sole proprietorship, this is the only section required.
- Management team : Describe managers and their roles, key employee positions, and how each will be compensated. Include brief résumés.
- External resources and services : List any external professional resources required, such as accountants, lawyers, or consultants.
- Human resources : List the type and number of employees or contractors you will need, and estimate the salary and benefit costs of each.
- Advisory board : Include an advisory board as a supplemental management resource, if applicable.
The operating plan outlines the physical requirements of your business, such as office, warehouse, or retail space; equipment; supplies; or labor. This section will vary greatly by industry; a large manufacturer, for instance, should provide full details about supply chain or specialty equipment, while a therapist's office can get by with a much shorter list.
If your business is a small operation (like a one-person, home-based consulting firm), you might choose to eliminate the operating plan section altogether and include the operating essentials in the business overview.
- Development : Explain what you have done to date to identify possible locations, sources of equipment, supply chains, and other relevant relationships. Describe your production workflow.
- Production : For manufacturing, explain how long it takes to produce a unit and when you'll be ready to start production. Include factors that may affect the time frame of production and how you'll deal with potential problems, such as rush orders.
- Facilities : Describe the physical location of the business. Include geographical or building requirements; square footage estimates (with room for expansion if expected); mortgage or leasing costs; and estimates of maintenance, utilities, and related overhead costs . Include zoning approvals and other permissions that are necessary in order to operate.
- Staffing : Outline expected staffing needs and the main duties of staff members, especially the key employees. Describe how the employees will be sourced and the employment relationship (i.e., contract, full-time, part-time) as well as any training needs and how these will be provided.
- Equipment : Include a list of any specialized equipment needed, along with cost, whether it will be leased or purchased, and sources.
- Supplies : If your business is, for example, manufacturing, retail, or food services, include a description of the materials needed, reliable sources, major suppliers, and how you will manage inventory.
The financial plan is the most important section for lenders or investors. The goal is to demonstrate that your business will grow and be profitable. To do this, you will need to create realistic predictions or forecasts.
To avoid inflated expectations, a prudent financial plan underestimates revenues and overestimates expenses.
- Income statements : The income statement displays projected revenues, expenses, and profit. Do this on a monthly basis for at least the first year for a startup business.
- Cash-flow projections : The cash-flow projection shows your monthly anticipated cash revenues and disbursements for expenses. To be considered a good credit risk, it is important to demonstrate that you can manage your cash flow.
- Balance sheet : The balance sheet is a snapshot summary of the assets, liabilities, and equity of your business at a particular point in time. For a startup, this would be on the day the business opens.
- Breakeven analysis : Including a breakeven analysis will demonstrate to lenders or investors what level of sales you need to achieve to make a profit.
Section 8: Appendices and Exhibits
The appendices and exhibits section contains any detailed information needed to support other sections of the plan.
Possible Appendix or Exhibit items include:
- Credit histories for the business owners
- Detailed market research and analysis of competitors
- Résumés of the owners and key employees
- Diagrams and/or research about your products and/or services
- Site, building, or office plans
- Copies of mortgage documents or equipment leases (or quotes)
- Marketing brochures and other materials
- References from business colleagues
- Links to your business website
- Any other material that may impress potential lenders or investors
SCORE. " Business Plan Template for a Startup Business ." Accessed April 28, 2021.
U.S. Small Business Administration. " Write your business plan ." Accessed April 28, 2021.
U.S. Small Business Administration. " SBA Recommended Business Plans and Length ." Accessed April 28, 2021.
Bplans. " Why Plan Your Business? Look at This Data ." Accessed April 28, 2021.
Marketing MO. " Pricing Strategy ." Accessed April 28, 2021.
Incorporate.com. " Write a Business Plan, a Step-by-Step Guide ." Accessed April 29, 2021.
Startup Nation. " The Five Costs You're Most Likely to Underestimate in Your Business Plan ." Accessed April 28, 2021.
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- Business plans
Develop your business plan
On this page
Why you need a business plan
Download a business plan template.
Whether you've just started out or have been running your business for years, business planning can be the key to your success. Having a business plan:
- helps you to prioritise – it gives your business direction, defines your objectives, maps out how you'll achieve your goals and helps you to manage possible bumps in the road
- gives you control over your business – the planning process helps you learn about the different things that could affect your success. If you're already in business, it helps you to step back and look at what's working and what you can improve on
- helps you seek finance – if you're seeking finance for your business, you'll need to show banks and investors why they should invest in your business.
Use our Business plan template for detailed business planning or seeking finance.
Choose the Lean business plan template to quickly focus your business and set some goals for the year ahead.
Business plan template
Lean business plan template
Our templates step you through the process of developing a business plan with links to extra information if you need it.
If you're developing a detailed business plan, you may want to check our tips below before you start.
1. Determine what your plan is for
Does your business plan have more than one purpose? Will you use it internally, or will you share it externally, for example with potential investors or banks?
Deciding what the purpose is, can help you develop your plan for the right audience. If the plan has been developed for third parties, you will need to determine what they’ll be most interested in.
2. Prepare your finances
If you're looking for finance, lenders and investors will want to know if your finances are in order and your business is in a strong financial position. They'll want to know how much money you currently have, how much money you need and how much you expect to make in the near future. While a bit of extra funding will help you ensure you’re covered for unexpected costs, be realistic and avoid asking for more than you need.
If you're starting out and don't have financial information yet, our business plan template provides resources to help you get your finances ready.
3. Write your summary last
Summarise the main points of your business plan using as few words as possible. You want to get to the point but not overlook important facts. This is your opportunity to sell yourself, but don't overdo it. The summary should include details about your business, market, goals and what makes you different from other businesses.
4. Get help
Don't leave your business plan to the last minute. It takes time, research and careful preparation to develop an effective business plan.
I f you aren't confident in completing the plan yourself, consider getting a professional to look over it and provide advice.
There are a number of government services available to help you plan, start or grow your business. These services can provide general advice, workshops, seminars and networking events, and can even match you with a mentor or business coach.
Get expert help from a business adviser in your area.
5. review your plan regularly.
As your business changes, your plan will need to change to ensure your business is still heading in the right direction. Having your plan up-to-date can keep you focused on where you are heading.
It's a good idea to keep a record of each version of your business plan.
6. Protect your plan
Having an understanding with third parties when distributing a plan could be enough protection for some businesses. But if you have innovative business practices, products or services, you may want people to sign a confidentiality agreement to protect your innovations.
It may also be a good idea to include some words in your plan asking the reader not to disclose the details of your plan.
Start writing and developing your marketing strategy.
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Sole Trader: A Complete Guide With the Advantages and Disadvantages of a Sole Trader Account.
What is a sole trader?
- Advantages and disadvantages of a sole trader business
- Setting up sole trader accounts
A sole trader is the most simple and minimalistic form of business structure which is relatively inexpensive and easy to set up. If a single proprietor engages in any business activity without a formal organization and keeps the profits for themselves, they are known as a sole trader or sole proprietor. A sole trader is legally responsible for all aspects of their business. A sole trader will generally make all the decisions about starting and running their business and have the liberty to employ people as per their needs. A sole trader can also use a business name other than their legal name. However, they may have to legally trademark their business name if it differs from their legal name. This process may vary depending upon their country of residence.
Being a sole trader comes with its perks and risks. A sole trader bears complete responsibility for the finances and accounting of their business and so it can get very difficult. Very soon, this can even curb the growth of their company. Therefore, most sole trader businesses eventually get bought out by limited companies. These limited companies usually overtake sole trader businesses if they see profitability or if they feel that the sole trader’s company can be a direct competitor to their business.
Advantages and Disadvantages of a sole trader business:
Now that we have a basic idea of who a sole trader is, it’s now time to look at the various pros and cons that are associated with running a sole trader business.
Pros of being a sole trader business:
A sole trader business gives the proprietor advantages like ease of setting up or shutting down a business at any time. As the sole trader will be the only decision-maker, executing plans will be quick and hassle-free. Business operations for a sole trader are completely private, so their competitors will not be able to learn how much they earn. Their business will also have a personal touch and will not be shadowed by the burden of being a corporate entity. In addition to that, the paperwork and accounting for a sole trader business is fairly simple, so they can easily start their business in a matter of days.
Cons of being a sole trader business:
One of the biggest disadvantages of being a sole trader is the personal liability. With limited finances, the need to borrow money for the business often arises, for which a bank may require personal property as collateral. Sometimes banks are reluctant to lend to sole traders or charge them a higher interest rate because of a general lack of business longevity in sole trader businesses, which can be mainly due to owners becoming incapacitated due to age, health, or death. A limited leadership experience may also create hurdles while trying to ensure that business operations run smoothly.
Setting up sole trader accounts.
If you decide to be self-employed and begin a sole trader business, you will need to set up your sole trader account to record your expenses and income.
To do this, you will need to be aware of tax regulations , basic accounting, and bookkeeping .
Here’s a quick guide on setting up sole trader accounts.
1. Open a separate bank account.
Legally, a sole trader is not separate from his business, so a separate business bank account may not be required to run a sole trader business.
However, it is always advisable to keep your business and personal finances separate: because:
- If you only have a personal bank account you will have to be careful while specifying personal and business-related expenses.
- Recording expenses and income takes more time when you have to classify each expense.
- Having a separate business bank account, allows you to easily record business expenses and income. Thus, completing your annual accounts and assessing your taxation becomes less time-consuming.
2. Keep a tab on the taxation regulations.
As a sole trader, you will be required to set aside money for your taxations each year, which will have been self-assessed. It, therefore, becomes necessary to be aware of income tax thresholds and the National Insurance Contributions (NICs) you will be required to pay.
Failure to monitor your taxes as a sole trader can severely impact your business. With each country having a separate set of laws to deal with tax defaulters, your inability to pay taxes on time, can lead to fines and in some cases even a prison sentence. Read why auditing is important for all businesses including that of a sole trader.
Bookkeeping for a sole trader is fairly simple and minimal when compared to a limited company. Your primary goal as a sole trader will be to track monthly income and expenditure. For doing so, you must keep records of all your invoices and receipts.
It’s also advisable to keep receipts of any work-related transactions. If you own an office, or if you work from home, you may be able to claim rent and bills back from your national tax body as a business expense. You can check out our blog to learn the basics of bookkeeping .
Alternatively, you can also use bookkeeping software or an online accounting facility to record your business expenses and income.
These bookkeeping software packages can help you save valuable time by cutting out duplication and are hence becoming more and more popular with sole trader businesses. To know more or to find the best bookkeeping software for your needs, check out Deskera's bookkeeping section.
As a sole trader, you’re responsible for managing your company accounts – it’s therefore important to have the right tools for keeping on top of your finances.
Deskera provides an intuitive and easy to use software, which not only helps sole traders in their responsibilities of accounting but also in CRM , invoicing , payroll, financial reports & more.
Want to know more about the various nuances of the business world? Stay updated with the latest business developments through Deskera’s insightful blogs .
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A sole trader or sole proprietor is someone who establishes and operates a business on their own. This individual sole trader is responsible for all aspects of the business, including making decisions, managing finances, and assuming liability for any debts or legal issues that may arise.
For example, a sole proprietorship provides no liability protection to the owner. By contrast, an LLC has protection against creditors seizing the owner’s personal assets, such as their home.
You can find examples of business plans for different types of businesses at: ACCA – the Association of Chartered Certified Accountants have 3 example business plans for three different business sectors: Cafe, Import Business, UK Ltd business seeking finance.
Introduce your company briefly, sticking to vital details such as size, location, management, and ownership. Describe your main product (s) and/or service (s). Identify the customer base you plan to target and how your business will serve those customers. Summarize the competition and how you will get market share.
A sole proprietorship is the default business entity that your business falls into if you do nothing and are the only owner of your business. It carries the lowest setup fees and requires very ...
Download a business plan template . Use our Business plan template for detailed business planning or seeking finance. Choose the Lean business plan template to quickly focus your business and set some goals for the year ahead.
A sole trader is the most simple and minimalistic form of business structure which is relatively inexpensive and easy to set up. If a single proprietor engages in any business activity without a formal organization and keeps the profits for themselves, they are known as a sole trader or sole proprietor. A sole trader is legally responsible for ...