Want to talk to an expert employment law solicitor?

You'll receive a callback from a specialist within an hour

The nature of a sole trader

A “sole trader” is a person who is in business on their own account – essentially self-employed. A sole trader business doesn’t have to have just one employee (the “sole trader” himself) but can have many employees. However, the sole trader is generally the person running the business.

A sole trade earns his income (he can be anything from a hot-dog vendor to a sole practitioner solicitor) from payments from his customers or clients. The sole trader’s profits are taxed as income. He is liable to pay Class 2 National Insurance Contributions whether or not he makes any profit and must pay Class 4 National Insurance Contributions on profits. As with any self-employed person a sole trader is required to register for Self-Assessment on his taxes and complete and return a tax return annually.

Being a sole trader is the simplest way to run a business as there is no requirement to pay registration fees, the sole trader keeps all the profits, and the keeping of accounts is relatively straightforward. Further, the sole trader has the right to make all decisions relating to the business and owns all the assets of the business.  However, a sole trader is personally liable for the debts of the business. This means that if business goes badly then the sole trader can go bankrupt. This is obviously rather serious and requires a balancing in the mind of the sole trader between the risks and rewards of operating as a sole trader.

The nature of a partnership

There are three types of partnership:

  1. Ordinary partnerships
  2. Limited partnerships
  3. Limited liability partnerships

Ordinary partnerships are covered in this post. Limited partnerships and limited liability partnerships will be covered in a future post.

“Ordinary” partnerships are governed under the Partnership Act 1890. A partnership occurs where two or more legal or natural persons carry on business together as equals. An important point to note is that partnerships don’t have to be between two “natural” persons (i.e. humans like you and me) – they can be between “legal” and “natural” persons, such as companies or other partnerships.

The partners in a business divide the profits and the losses of the business between them, unless the partnership agreement specifies otherwise. Each partner is responsible for pay tax on their share of the profits and for making the correct National Insurance Contributions.

The advantages of a partnership are that there are very few formalities in setting it up. This means that there is generally less hassle and expense. Further, a partnership (unlike a private or a public company) has no memorandum or articles, is not required to register, is not required to have its accounts available for public scrutiny, doesn’t require a written agreement (although it’s recommended that such is obtained), and is not subject to the swathe of rules that companies are subject to.

The disadvantages of engaging in a business partnership is that the partners have unlimited liability for the debts of the partnership both jointly and severally. This means that all or any one of them could become liable for the entire debts of the partnership. As with sole traders, those persons engaging in a partnership could potentially be bankrupt by the business (although this problem doesn’t generally apply to limited companies). Further, a partnership may find it more difficult to attract investment than a private or public company – it can’t issue debentures, for example.

Our specialist commercial solicitors’s view on sole trader vs partnership

Which business model you chose to adopt for your business will be wholly dependent on your circumstances and the business that you wish to engage in. The advantages of both models are, generally, their flexibility and lack of administration (as compared to companies, for example). However, there are substantial disadvantages to being a sole trader or a partner and the most substantial is the potentially unlimited liability that you can incur. This can lead to bankruptcy.

Want to talk to an expert employment law solicitor?

You'll receive a callback from a specialist within an hour

Share →

Our awards

Request a callback

    Your first name (required)

    Your last name (required)

    Your email (required)

    Your telephone number (required)

    Brief details of your enquiry

    Contact us

    Please feel free to discuss your own position and concerns. Contact your nearest office on:

    T: 020 3397 3603
    E: enquiries@redmans.co.uk
    W: www.redmans.co.uk

    Testimonials

    4.78 Average

    268 Reviews

    Anonymous

    Redmans Solicitors were consistently prompt, efficient and professional from the start of my reaching out to them for support in relation to contentious negotiations of an employment matter that continued for almost two months resulting in a positive settlement agreement. Chris Hadrill was diligent, thorough, empathetic and objective in his advice and guidance, showing deep and broad knowledge of the law and legal processes plus extensive practical experience in handling complex matters, resulting in clear and pragmatic advice in ambiguous circumstances that resulted in a very good outcome. I fully recommend Chris Hadrill and Redmans Solicitors! I have made this review anonymous purely because of the confidentiality obligations in the settlement agreement concluded.

    Posted 4 weeks ago

    Michelle W

    Redmans solicitors provided legal support and advice for a settlement agreement. Excellent customer service, very professional. The senior associate solicitor kept me updated throughout the process, showed empathy and the agreement was signed-off / completed within the agreed timeline.

    Posted 4 weeks ago

    Mark W

    Redmans Solicitors were extremely professional and helpful! Chris Hadrill handled my case and was an amazing help! His guidance, advice and understanding to my redundancy settlement were always clear, concise and very helpful and I am very grateful to him, and glad I found Redmans to help with my settlement. I highly recommend them!

    Posted 1 month ago

    Alison M

    Very happy with the advice I received

    Posted 1 month ago

    Margaret A

    I found everything about the company to be extremely professional and efficient. During my initial contact with Chris, he listened well and was reassuring, so I felt confident that my case would be well handled. Caroline was excellent at explaining all the legal points and answering my questions, as well as being very supportive and understanding throughout the process. I would definitely recommend this company.

    Posted 1 month ago

    Sanja K

    Very efficient and professional service.

    Posted 1 month ago

    Anonymous

    I found the advice I was given by Redmans Solicitors to be clear and useful and found the solicitor on my case to be both knowledgeable and approachable.

    Posted 1 month ago

    Karen T

    Great service. Thank you.

    Posted 1 month ago

    Anonymous

    Excellent service from Chris & Mel Chin. The best outcome was achieved from the redundancy process. They were extremely thorough, listened carefully and acted swiftly on my behalf. I highly recommend Redmans Solicitors

    Posted 1 month ago

    Shanine M

    Excellent service, thank you so much!

    Posted 1 month ago

    Anonymous

    I found Caroline and Chris very Helpful and provided excellent service. Caroline especially provided great legal advice and made me feel at ease with the whole process. I would highly recommend them. Thank you!

    Posted 1 month ago

    Gayle B

    Excellent company very professional would definitely recommend

    Posted 1 month ago

    Alex K

    Redmans provided an excellent service, timely and effective. Will definitely recommend.

    Posted 1 month ago

    Anonymous

    Great job done on my employment law

    Posted 1 month ago

    Dominica S

    Caroline & Chris were very prompt and efficient.Very happy with the service and will definitely recommend Redmans Solicitor to everyone !

    Posted 1 month ago

    Sandra K

    If you are looking for a group of solicitors who are Professional, Caring and on point, then look no futher than Redmans. I was literally hand held through out my case. Can not find fault with this company, very happy with the result and the service i received. Would highly recommend Redmans.

    Posted 1 month ago

    Anonymous

    I found dealing with Redmans a pleasure. I got to speak to someone quickly, the advice was profferred promplty and the service was not 'pushy'. In addition, the administration was excellent. What more could you ask for?

    Posted 1 month ago

    ALISDAIR L

    Redmans did a brilliant job regarding my redundancy agreement. I miss read an extra charge which wasnt the case so doing a new review to clarify. I would recommend Redmans for any employment law issues you may have.

    Posted 1 month ago

    Christos G

    Great legal advice and quick correspondence. Very supportive and helpful through the entire process. Thank you Redmans!

    Posted 1 month ago

    Anonymous

    Chris Hadrill advised me on a redundancy settlement agreement. He was very responsive, easy to deal with and gave me good advice at a stressful time.

    Posted 1 month ago

    Zara M

    Rana at Redmans gave me support and confidence I needed to ensure a wrong, was put right. I couldn’t recommend enough.

    Posted 1 month ago