A Sole Trader

A sole trader is a self-employed person who owns and runs their own business as an
individual. A sole trader business doesn’t have any legal identity separate to its owner. That
leads many to say that as a sole trader you are the business (korchak. J 2023)

While sole traders are often considered a one-man business organization, it’s important to
remember that the term ‘sole trader’ refers to the business structure not the number of
employees. While a sole trader trades alone and is self-employed, it doesn’t mean he or she
performs the day-to-day operations alone without hiring employees.

As a sole trader, you have absolute control over your business, its assets and profits after
tax. Alongside this control, this business model offers comparative simplicity, versatility and
a number of other advantages.

According to Korchak, "Unlike the owners of a limited company, however, a sole trader is
personally liable for their business’s debts. Their personal assets may be at risk if creditors
cannot be paid. This unlimited liability and the pressure involved in having to shoulder all the
responsibility can be significant challenges."

The sole trader business model can be used by many types of business. It is perhaps most
popular among tradesmen providing services to individuals and families. So it’s common to
find plumbers, decorators, plasterers, hairdressers and other individual providers of
specialist services operating as sole traders. But you might also find other types of business
operating as sole traders, from small shops and manufacturers to internet entrepreneurs
and self-employed consultants.

Unlike many other types of business, for a sole trader:

There is no requirement to register the business with Companies House or make

ongoing filings of information with them.
There are no directors to run the business, just the sole trader.
There are no shareholders to invest capital. Instead, funding for the business is
limited to what the sole trader can raise personally.
There are not multiple partners like in a general partnership. Therefore, the sole
trader model is not usually suitable if you’re looking to go into business with
someone else, sharing the responsibility and rewards.

However, a sole trader shares many characteristics with other business forms, including:

You still have to report and pay tax to HMRC. We look at the process of registering
as a sole trader with HMRC and your ongoing responsibilities below.
While it may be true that as a sole trader ‘you are the business’, it’s still prudent to
manage certain things separately. That includes having a separate bank account for
the business to your personal account.
If you choose to trade under a name other than your own name, you must still
follow certain rules around naming your business. For example, your business name
cannot be offensive, contain certain ‘sensitive words’ or copy that of another
 existing business. You must include your own name and, if different, the name of the
business on business documents like invoices, letters and receipts.
You can employ staff. Being a sole trader means you bear all responsibility for the
business, not that you have to work on your own.

A Cooperative

A cooperative is an association of persons (organization) that is owned and controlled by the

people to meet their common economic, social, and/or cultural needs and aspirations
through a jointly-owned and democratically controlled business (enterprise).

Cooperatives can be created for a number of different reasons or to fulfill a number of

different needs: jointly process goods, split costs, split control over work, purchasing power
(bulk buys), shared employees, shared wages, etc. The people of the cooperative are those
who use its products, supplies, and/or services. Profits are also often returned back to the
members of the cooperative, however, cooperatives are often more focused on services for
members than for investments.

Here are some of the principles of a ooperative

Cooperatives are voluntary organizations, open to all persons able to use their
services and willing to accept the responsibilities and meet the requirements of
membership, without gender, social, racial, political or religious discrimination.
Members have control over setting policies for the co-op and making decisions for
the cooperative.
Cooperatives are democratic organizations controlled by their members, who
actively participate in setting their policies and making decisions.
Members contribute equitably to, and democratically control, the capital of their
cooperative.
Cooperatives are autonomous, self-help organizations controlled by their members.
Cooperatives work for the sustainable development of their communities through
policies approved by their members.
Cooperatives are voluntary organizations, open to all persons able to use their
services and willing to accept the responsibilities and meet the requirements of
membership, without gender, social, racial, political or religious discrimination.
Members have control over setting policies for the co-op and making decisions for
the cooperative.
Cooperatives serve their members most effectively and strengthen the cooperative
movement by working together through local, national, regional, and international
structures.
Cooperatives provide education and training for their members, elected
representatives, managers, and employees so they can contribute to the
development of their cooperatives. They inform the general public about the nature
and benefits of cooperatives.

Advantages of a cooperative
A cooperative uses democratic principles.One of the best perks of having a cooperative
model in business is the democratic approach it takes to ownership. The obligations of
members get met with it, without one member governing the process of decision-making. It
is a structure that can be appealing to individuals who want to become members themselves
eventually.

Each cooperative comes with defined economic advantages that get based on the
industry in which it operates. Consumers receive entitlements to patronage
dividends through the productivity generated in activities based on net earnings. It’s
an amount that’s determined by what members spend on products or services
based on each financial period.
Cooperatives work toward the best interests of eeveryone When individuals have a
significant stake in the outcome of a business effort, then each person remains more
productive and stays engaged with the required processes. This advantage results in
significantly better outcomes in time because everyone involves themselves at their
highest capacity levels. Ownership almost always creates better efforts because
there is a stake in the results.

Disadvantages of a cooperative

Cooperatives have fewer investment incentives to offer. Fundraising activities can

become a significant issue for cooperatives because there are few incentives for
angels and venture capitalists to fund operations. Smaller investors from customers
who want to become involved in the community are often high, but that
involvement can also lead to lower shares of whatever outcome gets earned from
the effort.
Cooperatives receive a vast majority of their funding from their members. Then each
person either contributes labor, resources, or both to create the desired outcome.
The profit share that each member receives gets based on their contribution within
the outlined structures of the contract that gets signed. That’s why most agricultural
cooperatives have members pay a specific amount to receive a percentage-based
share of whatever harvest is achievable during the season.
Cooperatives struggle to establish unique bbranding Cooperatives can sometimes
lose sight of their unique branding because their members are part of a diverse
community. It becomes part of each individual instead of standing separately as a
unique brand. This issue is similar to what a sole proprietor faces when they operate
under their given name instead of a brand.

A Corporation

corporation is a legal entity that is separate and distinct from its owners. Under the law,
corporations possess many of the same rights and responsibilities as individuals. They can
enter contracts, loan and borrow money, sue and be sued, hire employees, own assets, and
pay taxes, Janet Berry-Johnson (2023).

There are several advantages to becoming a corporation, including limited personal liability,
easy transfer of ownership, business continuity, better access to capital, and (depending on
the corporation structure) occasional tax benefits. The legal structure of your corporation
and the benefits you receive from it will depend on the specific setup of your business.

A corporation is not for everyone, and it could end up costing you more time and money
than it’s worth. Before incorporating your business, you should be aware of these potential
disadvantages: There is a lengthy application process, you must follow rigid formalities and
protocols, it can be expensive, and you may be double taxed (depending on your
corporation structure).

A Company

Adam Hayes defined a company as a legal entity formed by a group of individuals to engage
in and operate a business commercial or industrial enterprise. A company may be organized
in various ways for tax and financial liability purposes depending on the corporate law of its
jurisdiction.

The benefits of starting a company include income diversification, a strong correlation

between effort and reward, creative freedom, and flexibility. Another advantage of
companies is that they create jobs. If an individual starts a company and it grows, most often
they have to hire employees. This increases the number of jobs available in a nation,
employs people, reduces unemployment, and brings wealth into the economy.

There is often a tremendous amount of personal satisfaction garnered from starting your
own company. This involves following your dreams and passions and leaving a legacy.

The disadvantages of starting a company include increased financial responsibility, increased

legal liability, long hours, health risks due to stress, responsibility for employees and
administrative staff, regulations, and tax issues.

There is a tremendous amount of risk in starting a company, from the time invested and,
therefore, opportunity cost from not working a salaried job, to financial risk. Failure is of
course one of the biggest disadvantages; however, many successful entrepreneurs attest
that their first businesses failed and that the experience was an important learning tool.

References

Online information, Korchak. J, April 16, 2023. What is a sole trader? Retrieved from
https://www.informdirect.co.uk/business-management/what-is-a-sole-trader/

Online information.(2023) What is a Cooperative. Retrieved from https://ncdc.unl.edu/what-

cooperative

Online information. Louise Gaille, March 5th, 2020. 19 Top Advantages and Disadvantages of
a Cooperative. https://vittana.org/19-top-advantages-and-disadvantages-of-a-cooperative
Online information. (2023)Pros and Cons of Forming a Corporation. Retrieved from
https://www.businessnewsdaily.com/15805-corporation-advantages-and-
disadvantages.html#what-is-a-corporation

Online information. Janet Berry-Johnson, 14th June 2023. Corporation: What It Is and How
to Form One. Retrieved from https://www.investopedia.com/terms/c/corporation.asp