Sole trader advantages
- Be your own boss. The main benefit of being a sole trader is that you are your own boss and you can dictate the direction of the business.
- Keep all the profits.
- Easy to set up.
- Low start-up costs.
- Maximum privacy.
- Easy to change the business structure.
- Unlimited liability.
- Tax may not be efficient.
Self-employed public liability insurance is not legally required for most business, but is considered necessary if people visit your business premises. Saying that, some customers may demand that you have some public liability cover, simply so they know that they're protected.
15 sources of business finance for companies & sole traders
- Business loans. Business loans typically allow you to borrow an agreed sum of money and pay it back over a certain period with interest.
- Invoice finance.
- Business overdrafts.
- Business credit cards.
- Startup loans.
- Merchant cash advance.
- Commercial mortgage.
- Asset finance.
If your type of home work requires visitors to the house for purposes related to the business, you should consider public liability insurance too. Though not compulsory, public liability cover protects you from loss or damage resulting from claims made by anyone who visits your home in connection with your business.
Business insurance policies you are legally required to have
- Employers' liability insurance.
- Public liability insurance.
- Buildings insurance for your premises.
- Motor vehicle insurance.
- Industry-specific insurance policies.
- Professional Indemnity (PI) insurance.
- Director's & Officers insurance.
- Employee travel insurance.
The overall biggest difference between a sole trader and a limited company is that a sole trader is owned and controlled by one person who has unlimited personal liability for the business whereas a limited company will have its ownership split into equal shares.
As a sole trader, you're not legally required to have a business bank account. You can use your personal bank account for all business transactions. This is because as a sole trader, your personal and business income is treated as one and the same by HMRC for tax purposes.
Sole traders work for themselves but have not formed a company to work under. Unless a sole trader can be regarded as a working director, they cannot cover themselves under their workers compensation policy. If a sole trader has employees, they must take out workers compensation cover.
You need as much as you need for your specific risks, and for each business this is different. You can source cover as low as £1 million although any business with any regular contact with the public will most likely start there cover at £2 million at the minimum.
Sole traders are allowed to receive income protection insurance. Although, as a sole trader you are not legally required to take out income protection insurance. With that being said, it is highly recommended you do. This is because sole traders generally don't have sick leave or workers compensation.
If you're a sole trader expecting annual turnover of more than $75k you must apply for an ABN and register for GST. The ATO suggests applying for an ABN when starting out as a sole trade, irrespective of your annual turnover.
With a sole trader you can either sue the business, or the individual who owns it. Where possible, go for the owner, as they are personally liable for all debts. You will need to know the person's home address if you want to sue them.
No, as a sole trader you are more likely to require legal expenses insurance (LEI), this should provide the level of cover you require as the owner of your business.
What does public liability insurance for self-employed builders cover? Public liability insurance for self-employed builders covers claims made against you by third parties who allege that they have been injured or had their property damaged as a result of your building activities.
Professional indemnity (PI) insurance is a commercial policy designed to protect business owners, freelancers and the self-employed if clients claim a service is inadequate. Any organisation which provides a professional service or gives advice could be sued if the recipient is unhappy with their work.
A sole trader is a self-employed person who owns and runs their own business as an individual. A sole trader business doesn't have any legal identity separate to its owner, leading many to say that as a sole trader you are the business. In another article, we look in detail at sole trader advantages.
There are many different types of insurance available to give sole traders peace of mind, from personal accident or income protection if you're unable to work, to professional indemnity and public liability insurance, which cover you against claims from other people.
