Sole Trader Definition
These days, freelancing is all the rage, and the rewards are many. For the most part, you can set your own schedule, take on clients of your own choosing, and follow the beat of a different drummer – so to speak.
That said, being literally employed by yourself is a lonely space to be at times. And, running the show doesn’t necessarily mean you don’t need to interact with others. So, here are a few things to consider if you’re thinking of starting up your own business.
Would you rather be self-employed?
There are advantages for sure. Not having to punch a time clock is a big one. Taking the lead, with what you know are great ideas, is another. Not having a ceiling imposed on how much you can earn and advance – now, that’s probably the top reason people decide to freelance.
Generally speaking, most Sole Traders are entirely home-based (which offers a substantial savings of time and money on transportation alone). Of course, there are other benefits such as tax deductions – where expenditures for your computer, mobile phone, Internet cable, proportionate utilities and maintenance are now considered a cost of doing business. If your work is mobile in nature, money spent for travel now becomes a deductible line item as well (sole trader definition).
Legally speaking, are you on your own?
And, the answer is: Yes. Certainly, when we’re talking business structures, the very definition of a Sole Trader is a person working on their own. They are responsible for running the operation, though they may hire employees or independent contractors if their revenues will support this. Sole traders are also legally bound to file a Self-Assessment tax return every year, to pay income tax and National Insurance, and possibly Value Added Tax (depending on the total revenues).
However, unlike the co-ownership structures of a partnership or limited company, any after-tax profits belong to the Sole Trader alone. That reward does not come without high risk – the self-employed are solely responsible for losses incurred as well, which puts their personal assets at risk. If this is a concern, you might want to have a discussion with a corporate business lawyer about shared ownership structures which would allow you to share the burden of risk and duties with others.
Can too much isolation be a problem?
Yes, absolutely. Not only might co-working spaces be a collaborative cost-cutter for those Sole Traders who need a business environment to succeed, but the wealth of advice and support to be gleaned is truly invaluable.
Not everyone is meant to work on their own, every day. So, take the opportunity whenever you can to converge with like-minded individuals. Attending a group (whether it’s through a startup incubator, networking meetup or seminar) can inspire life-long associations, mentor relationships and even investment opportunities.
Try to put aside any notions of ‘not wanting to share because there may be a competitor in the room.’ Brainstorming with other entrepreneurs, who are already bent on transforming their own ideas into realities, may have you trading services with them in the long haul. You might even find yourself mentoring another person just starting out on their own.