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Sole Trader

The major advantage of being a sole trader is probably that it is the simplest way to run a business. Keeping records and accounts is more straightforward. You will make all the decisions in terms of running the business and any finance raised for the business will probably need your assets as security. You will have to complete an annual self-assessment tax return for HMRC and keep records showing your business income and expenditure. Tax is paid on the profits of the business and Class 2 and 4 national insurance contributions are payable on the profits. The major disadvantage is that you are personally liable for the debts incurred by the business, which makes this a riskier option. Your home or other assets may be at risk if your business runs into financial difficulty.

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