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Meaning of a sole trader

When an individual starts to work for themselves on their own they are self-employed and classified as a sole trader. The likely characteristics are:

1. •

   the person sells goods or services to make a profit

2. •

   the person takes responsibility for the success or failure of the business

3. •

   they will have several customers or clients they are working for at the same time

4. •

   they can hire other people to work in the business and pay them out of the profits of the business

5. •

   items of equipment used in the business are provided by the individual

6. •

   the responsibility for correcting any defective work lies with the individual

These characteristics could also apply if an individual sets up and owns a limited company, but for tax purposes the individual is not treated as self-employed ― they are an owner and employee of the company. In addition, a person