Many small businesses start with the owner as sole proprietor. This is the oldest and simplest form of business structure. Basically, it means the owner is also the manager.

If you are a sole proprietor, the business debts are yours in the same way as the profits, and your creditor can pursue you and seize your personal assets to pay your business debts. This is called having ‘unlimited liability’. These days, a sole proprietor can incorporate - that is, become a one-person company.

There is no particular law covering sole proprietors, other than the requirement to register your business name if it is different from your personal name. You are taxed as a single person and your business and personal assets are not distinguished as separate entities. Generally, the more you earn, the higher the rate of income tax you pay. Therefore, if you split your income between two or more people who pay tax at a lower rate, you can pay less tax.

If you are considering changing from a sole proprietorship to a partnership or company to resolve some of the issues mentioned above, it is usually a good idea to get legal and financial advice first to help you determine which structure would suit you best.