Sole ownership is appropriate where a business is small and capital investment is minimal. Sole traders have total control of the business management, the assets and the profits.
Advantages and disadvantages
Advantages: | Disadvantages: |
- you're the boss
- easy to establish
- you keep all the profit
- low start-up costs
- simple to operate
- no specific laws covering sole proprietors
- maximum privacy
- easy to change legal structure
- easy to wind up.
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- unlimited liability for debts – no legal distinction between private and business assets
- limited capacity to raise capital
- you need to make all decisions
- retaining high-performing employees can be difficult
- hard to take holidays
- life of the business is limited
- taxed as a single person.
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Sole traders must comply with normal record-keeping and reporting requirements for taxation and legal purposes.
You should consult an accountant or lawyer to help you determine whether the structure of sole trader is appropriate for your business.
More information
On this site
Partnership
Proprietary company
Trust
Guidance and support
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Choosing the right business structure for you (PDF 234KB) - BizFacts