what are sole traders and partnerships
What are Sole Traders and Partnerships All About?
Choosing the correct legal structure for your business is very important as it can affect your liability levels and how much taxation you have to pay. Let’s have a look at two of the more common structures: Sole traders and Partnerships.
Every since losing his battle between good and evil, Darth had been looking for a new career move. He finally decided to set up his own small business.
SOLE TRADER
A Sole Trader is a one-person business with unlimited liability.
Notice that as a Sole Trader, Darth Vadar does not have the money available to pay someone else to do the research for him!
SOLE TRADERS USUALLY HAVE VERY LITTLE MONEY.
Sole traders will have to spend a lot of their own time and money trying to identify a ‘gap in the market’.
Those who do not research the market before setting up their business are much more likely to see their business fail.
Well sole traders tend to get the money to set up their business through a mixture of sources.
The most common source of finance is their own personal savings and any money that they might have received from leaving their previous job e.g. their redundancy pay.
A new business means HIGH RISK and banks might not be very helpful to you until you become more successful as a business.
You might get a small loan (high interest rate), an overdraft (daily charges) and a business bank account but do not expect too much more!
Venture Capital
One of the more common means for new business attracting investment is through venture capitalists.
Venture capitalists are prepared to accept higher levels of risk than high street banks and will invest money in a wide variety of different ‘high risk – high reward’ style new businesses. They will ask for a percentage of your profits and may even help you set up in the market.
Dragon’s Den is a classic example of venture capitalists.
They risk
Choosing the correct legal structure for your business is very important as it can affect your liability levels and how much taxation you have to pay. Let’s have a look at two of the more common structures: Sole traders and Partnerships.
Every since losing his battle between good and evil, Darth had been looking for a new career move. He finally decided to set up his own small business.
SOLE TRADER
A Sole Trader is a one-person business with unlimited liability.
Notice that as a Sole Trader, Darth Vadar does not have the money available to pay someone else to do the research for him!
SOLE TRADERS USUALLY HAVE VERY LITTLE MONEY.
Sole traders will have to spend a lot of their own time and money trying to identify a ‘gap in the market’.
Those who do not research the market before setting up their business are much more likely to see their business fail.
Well sole traders tend to get the money to set up their business through a mixture of sources.
The most common source of finance is their own personal savings and any money that they might have received from leaving their previous job e.g. their redundancy pay.
A new business means HIGH RISK and banks might not be very helpful to you until you become more successful as a business.
You might get a small loan (high interest rate), an overdraft (daily charges) and a business bank account but do not expect too much more!
Venture Capital
One of the more common means for new business attracting investment is through venture capitalists.
Venture capitalists are prepared to accept higher levels of risk than high street banks and will invest money in a wide variety of different ‘high risk – high reward’ style new businesses. They will ask for a percentage of your profits and may even help you set up in the market.
Dragon’s Den is a classic example of venture capitalists.
They risk