Sole Traders: As a sole trader you and the business are one and the same thing, no matter what you trading name is.

Many people who are sole traders refer to their business as a “company” it is NOT, a company is a separate legal entity.

• Your personal debts and the business debts are one and the same thing. This is very, very important.
  
  
  
• You do not have a wage in the normal sense; you have a “draw against income”.
  
  
  
  

Many self employed people and advisers cannot understand this point: make sure you do.

If you are drawing say £500 a week and the business can only afford £100.00 a week then you will be in debt very soon. After a year it will be substantial debt and this may manifest itself in a sizeable overdraft, loans that you may have difficulty in paying or an inability to pay wages………………… and the tax man!

If you go bankrupt as a sole trader so does the business, end of story. Likewise if someone seeks to declare you bankrupt for non payment of a business debt then ALL your personal debts (and assets) go with it. It is essential that as a sole trader you keep a very close eye on your finances at all times.

The fact that an invoice is addressed to the Business is no defence . If you are pursued for the debt then court papers will inevitably state “claim against Joe Smith t/a ABC Enterprises” i.e. YOU trading as ABC Enterprises.

It is important to note that as a sole trader the level of debt required to allow a petition for your bankruptcy is £750.00, NOT A LOT IS IT!

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