Running a Business As a Sole Trader

Running a business as a sole trader can be flexible, cost effective and administratively less burdensome than other business forms. 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 one 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 goods and services.

Convincing large companies to deal with a sole trader is much more difficult than it might be with other business structures, and while that prejudice 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 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 are aware of your market and your physical payment capabilities, this should prevent your business from running into serious 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. However it's certainly not without its problems, from unlimited liability through to credibility issues, which can often hold back the progress of any new business.

Source : enzinearticle