Debitoor Dictionary

Accounting terms explained in a simple way

Over 150 Articles for Founders and Entrepreneurs

  1. Corporation
  2. Franchising
  3. Limited company
  4. Partnership
  5. Self assessment
  6. VAT
  7. VAT registration

Sole trader – What is a sole trader?

A sole trader - also known as sole proprietorship - is a simple business structure whereby one individual runs and owns the entire business.

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Sole traders are legally responsible for all aspects of their business, and are personally liable for their business’s finances – whilst they can keep any profits, they may also have to repay any debts out of their own pocket.

A sole-trader is self-employed, but they are not necessarily the only worker within the business. ‘Sole-trader’ therefore refers to the legal structure of the business, rather than the number of employees.

Sole traders and their responsibilities

A sole trader is one of the easiest and most common structures for entrepreneurs and new businesses. If you become a sole trader, you will become responsible for:

You may also need to:

  • Register for VAT. If you have an annual turnover of over £85,000, this is compulsory. As a small business with a turnover under this threshold, you can also voluntarily opt-in to VAT registration.
  • Register with HMRC for the Construction Industry Scheme (CIS). Although this only applies if you’re working in the construction industry as a subcontractor or contractor.

Sole Traders and Debitoor

At Debitoor, we’re committed to supporting entrepreneurs and sole traders grow their business. Debitoor accounting & invoicing software is easy-to-use and intuitive - making it easy for sole traders to manage invoices, tax reports, expenses, and banking.