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Small Business As A Sole Trader

Jul 8, 2008
Small business as a sole trader is often consider arduous and full of struggle, with problems in overcoming credibility issues to increased tax burdens and personal liability. However, run effectively, a small business as a sole trader can be both profitable and successful, and can provide worthwhile goods and services to their local and wider communities. Running a small business as a sole trader can be flexible, cost effective and administratively less burdenous than other business forms, but no less conducive to achieving success in your chosen industry. However there are some factors you need to consider day to day when running a small business as a sole trader, and in particular whether some other business form would be more appropriate in your particular circumstances.

Doing business as a sole trader inevitably carries connotations of a lack of professionalism and credibility, born from the impression that many such businesses are run from the 'back bedroom', and are consequently incapable of providing quality. Convincing business owners to deal with a sole trader is much more difficult than it might be with other business structures, and while that prejudiced may not be merited, it is nevertheless persistent. A good way around this is to use a trading name for your business to give the impression of a more professional organisation, or to brand in your own name as if you were branding a business. Both of these techniques can divert much of the ill-feeling and distrust associated with sole traders as opposed to other business structures.

Running a small business as a sole trader also has risks associated with it in particular, as compared to other business formats. As a sole trader, you are ultimately responsible for all the debts of your small business, and your personal assets will be at risk if your business is unable to repay its debts. Thus, there is an obvious risk associated with running a small business as a sole trader, and this is one of the main reasons some opt for alternative structures. However, by making calculated financial decisions and not borrowing beyond your means, the sole trade model can be a flexible, suitable alternative to many of the more formal arrangements without compromising your personal wealth. While the risks remain, making sure you're aware of your market and your physical payment capabilities should prevent your small business from running into financial difficulties.

Running a small business as a sole trader is a great way to start off in business, and can even be a good way to run much larger operations in certain industries. Of course, it's not without its problems, from unlimited liability through to credibility issues, which can often hold back the progress of any small business run as a sole trader. However, by ensuring you work towards overcoming these obstacles, you should find as a sole trader you are more flexible in the operation of your small business, and you can enjoy the full rewards of your efforts with the minimum in administrative hassle.
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