| Takeda | 02-05-2021 06:01 PM |
Generic legal advice for sole traders
Sole traders are one of the most simple business entities, easily set up and with minimum of paperwork.
One primary benefit associated with the utilisation of a sole trader is that the personal details of the trader remain entirely private. This is a marked difference to a limited liability which legally requires the name, address and occupation of associated corporate officers (director, secretary etc).
Sole traders also benefit from the benefit of exclusive control of the assets of the business, meaning they retain all profits and autonomy over the business and its direction. This differs from public limited companies that are answerable to shareholders meaning that corporate decisions maybe thwarted in lieu of the whims of shareholders.
however, sole traders do not enjoy the legal protection of the process known as the veil of corporation/corporate veil.
In essence, the sole trader is not only entitled to full profits, but full debts as well. Say the sole trader incur debts in the course of their business venture to the value of £10,000. That £10,000 will first be depleted utilising the assets of the business (liquidation of stock), but any residual debt will have to be met by the sole trader.
In the event that the sole trader is unable to do so, they would be typically forced to declare bankruptcy. The Insolvency Act 1986 was the primary statute governing the varying types of bankruptcy, these rules were modified and somewhat relaxed via the Insolvency Act 2000.
Under the old regime, the trader had to personally petition the court for a mortarium to be granted, this process has been somewhat streamlined thanks to the 2000 Act.
It is vital that (pardon the pun) sole traders and indeed any trader ensures that they avoid the possibility of being legally declared bankupt.
the minimum period of disqualification is 2 years, and the maximum period is 15 years. (as per Company Directors Disqualification Act 1986). | 
