Sole traders

This is pretty much what it says on the tin: just one business owner selling a product or providing a service, although they can employ people and use subcontractors.

It’s the simplest and usually the smallest way of constituting a business and involves the least amount of work to administer.

You’ll still have to keep accounting records, and meet your legal obligations, depending on what kind of business you run.

You might choose this option if your business doesn’t have major loan or borrowing commitments, or needs lots of cash to get going, because as a sole trader, you’re personally responsible for any debts the business has.

Sole traders do not pay corporation tax, which isn’t to say you’re not liable to pay tax on your profits, just that it’s all handled through self-assessment which involves paying income tax and national insurance contributions (NICs).