question

A sole trader is certainly a business.

The term ‘sole’ does not mean that the person is necessarily working alone. It refers to ownership, provision of capital and to who enjoys the profits.

So a sole trader will have one owner and could work completely alone (eg a self-employed electrician). If you are on your own it is difficult to be an organisation, which implies groups of people acting together in pursuit of common goals or objectives.

However, our electrician’s business could grow, so although still owned by one person (and not a company) there could be a number of employees, including different grades and a hierarchy. In which case the sole trader would be the owner of an organisation.

A sole trader really means a sole owner. A sole trader can have employees so there can be an organisational structure.

With respect to boundaries, a limited company provides a boundary which provides limited liability. A sole trader (or partnership) does not enjoy limited liability, but nevertheless there is a boundary. For example, the non-current assets of a sole trader’s business will appear in the business SOFP, but his or her personal assets will not. The business will have its own letterhead and can be registered for VAT, but the owner’s personal transactions are not part of the VAT returns.