sole trader business plan example

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sole trader business plan example

Sole Trader

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:

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 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

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.

Specialised skills

Managerial skills

Self-discipline

--> What sources of finance are available to a sole trader?

Sources of finance available for a sole trader include:

--> 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:

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.

Unlimited liability.

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?

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.

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The Bottom Line

Sole Proprietorship: What It Is, Pros & Cons, Examples, Differences From an LLC

sole trader business plan example

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 .

Key Takeaways

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.

33.2 million

The number of small businesses in the United States in 2022. Together, these businesses employed 61.7 million people across the country.

Disadvantages

The following are some of the most common disadvantages of sole proprietorships.

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.

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 .”

Types of Corporations

Small Business Taxes

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Small Business UK

Small Business UK

Advice and Ideas for UK Small Businesses and SMEs

Example business plans

sole trader business plan example

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:

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:

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:

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sole trader business plan example

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.

Ready-made layouts

Generic, not customized

No financial guidance

Additional skills needed

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.

If you're addressing it to a company or individual, include:

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.

This section provides an overview of the industry and explains in detail what makes your business stand out.

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.

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.

Pricing Strategy

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.

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.

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.

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:

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

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:

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.

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Sole Trader: A Complete Guide With the Advantages and Disadvantages of a Sole Trader Account.

Priyanka Tiku Tripathi

What is a sole trader?

sole trader business plan example

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.

sole trader business plan example

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:

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.

3. Bookkeeping.

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.

sole trader business plan example

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.

sole trader business plan example

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.

Source: Deskera|Business tools for sole trader Deskera

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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COMMENTS

Sole Trader: Definition, Benefits & Examples
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.
Sole Proprietorship: What It Is, Pros & Cons, Examples
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.
Example business plans
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.
Simple Business Plan Template for Entrepreneurs
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.
8 Sole Proprietorship Examples (2023 Guide)
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 ...
Develop your business plan
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.
Who is a Sole Trader and what is a Sole Trader Business? -
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 ...