Structure guide
Sole trader
One individual owns and operates the business personally. It is usually the simplest structure, but the owner is personally responsible for its debts and obligations.
What it means
You and the business are not separate legal people. You make the decisions, keep the profits after tax and remain responsible for losses and debts.
Regular responsibilities
- Maintain business records.
- Register for Self Assessment when required.
- Report taxable profits and pay Income Tax and relevant National Insurance.
- Check VAT, PAYE and MTD obligations separately.
Money and tax
Tax is based on taxable business profit, not simply how much cash you withdraw. Moving money to a personal account is normally a drawing rather than a wage.
When to compare another structure
- Another person will become an owner.
- Risk, borrowing or contracts are becoming significant.
- Investment or a future sale is planned.
- Substantial profits may remain in the business.
Important cautions
Insurance can reduce some risks but does not create a separate legal entity. Changing to a company later may affect assets, contracts, VAT registration, payroll and tax, so plan the transfer rather than merely opening a company.