1 A business owner’s responsibilities
As a small business owner you will have certain legal responsibilities. The responsibilities vary depending on the sort of business structure the business has.
Try this activity to see if you can identify the key responsibilities for the sole trader and the director of a limited company.
Activity 1
The activity has 15 statements, seven are true for the sole trader and eleven are true for the director of a limited company.
See if you can get them all correct, if not you can review the answers to see the correct ones.
Comment
Some key points from the table
- The sole trader is responsible for all the business costs and expenses, just as if they were their personal costs and expenses.
- The director is not personally responsible for the business expenses.
- You will notice that neither the sole trader nor the director are required to retain an accountant. It may well be a good idea, but it is not a legal requirement.
- Both the sole trader and the director must register for and submit self-assessment tax returns (an accountant can also do this for them).
- Both the sole trader and the director must register for, and charge VAT if the business turnover reaches the threshold.
- The sole trader would normally pay Class 2 and Class 4 national insurance; this is not necessarily the case for the director or those past retirement age.
- The director has responsibilities to the other shareholders (if there are any) and must run the business in a specific way as set out in the ‘articles of association’. These are instructions on how meetings should be run and how decisions should be made in the business.
Here we have looked at just two of the responsibilities of particular traders. More detail on these responsibilities and the responsibilities of other business owners can be found on the government website [Tip: hold Ctrl and click a link to open it in a new tab. (Hide tip)] .
Learning outcomes