Sole Trader

A sole trader is a person who enters business on his own account, contributing the capital to start the business, working in it with or without the assistance of employees and receiving as his reward the profits or proceeds. No formal procedure is required to set up such a business, though the trading name may have to be registered, and some businesses may require a licence to operate. The sole trader is completely independent. He can make his own decisions and put them into effect quickly. Personal supervision, individual attention to customers’ and
clients’ requirements and low overhead costs can make this most basic of organisations a very effective business unit in specialized areas of shipping business. It is, for example, not uncommon to find Marine Surveyors, Consultants and even small port agency and brokers’ businesses operating as sole traders. The sole trader is responsible only to himself, and apart from making certain confidential disclosures for tax purposes, need not reveal the details of the business to anyone. The sole trader’s status carries with it a number of disadvantages, however, not least of which is his unlimited liability that means that he is personally liable to the full extent of his private wealth for the debts of the business. Insolvency in such circumstances may lead to the loss of virtually all his possessions to satisfy the
business’s creditors. He may also find it difficult to regulate his own working hours and to take time off for holidays. Similarly the business could quickly get into difficulties if the proprietor were to fall ill and be unable to work. It may also be difficult for the sole trader to expand his business to take advantage of business opportunities, as he must find the capital himself. He can borrow from a bank, of course, or from private sources, or take in a partner, but these steps will lead to a loss of independence and in such circumstances he may need to consider turning his enterprise into a more appropriate type of business unit.