Sole trader vs business partnership – which one is right for you?

When starting a new business in the UK, one of the first big decisions you’ll face is how to structure it. Many entrepreneurs choose between operating as a sole trader or setting up a partnership.

Both options have their advantages and drawbacks – the right choice depends on your goals, experience, skills, working style and appetite for risk. Here, we explore the key pros and cons of each to help you make an informed decision to go it alone or share the risks and rewards of business ownership. 

What is a sole trader? 

A sole trader is a self-employed individual trading as a business on their own. The individual and the business are one entity. A sole trader registers the new business with HMRC and pays income tax on the profits of the business alongside any other income they receive via a self-assessment tax return. Sole traders have unlimited liability, meaning you are personally responsible for the debts of the business.  

What is a business partnership? 

A business partnership comprises two or more self-employed individuals, trading as a business together. One partner, known as the ‘nominated partner’ registers the new business with HMRC and is responsible for filing the partnership tax return annually. Partners do not pay their income tax through the partnership tax return however - each partner pays income tax on their share of the profits of the business (alongside any other income they receive) through their self-assessment tax return. 

What about limited liability partnerships? 

A limited liability partnership (LLP) is a different kind of partnership, with some features in common with a limited company. For more information on ordinary partnerships and LLPs, see our business partnership article here. 

What are the pros and cons of being a sole trader? 

Pros	Cons
Easy to set up  No need to consider partnership shares or division of duties.	Buck stops with you  You take on all the risks and liabilities.
Fewer reporting obligations  Submit an annual self-assessment tax return to HMRC but there’s no need for a partnership return.	Limited capital  You’re the only one injecting capital into the business when required.
Business control Business decisions are yours and yours alone.	Reliance on you alone You don’t have a sounding board within the business with whom to test ideas with a shared goal of growing a successful business.
Keep all profits  You’ll retain all the profits after tax.	Smaller pie Could 50% of a larger overall pie be better?

What are the pros and cons of being in a business partnership? 

Pros	Cons
Shared Responsibility A problem shared is a problem halved.	Disputes Decisions may take longer, or partners may start to diverge on strategy.
Wider skills Diversity of skills and thinking is a real benefit to a business.	Profit sharing You need to decide how to shares the profits fairly – by capital injected upfront, hours worked in the business or another way?
Easier access to capital Two or more of you with access to savings or assets to use as security for lending.	Joint liability You don’t have a sounding board within the business with whom to test ideas with a shared goal of growing a successful business.

Sole trader vs business partnership – which is right for you? 

Ultimately the decision to set up your business as a sole trader or with a business partner should be decided based on many circumstances which are personal to you. Ask yourself some questions to help your decision: 

• Do you have a suitable business partner in mind?  
• Do their skills and experience complement your own so that you can both add value in different ways?  
• Do you both have capital, intellectual property or other assets to invest in the business? 
• Can you see yourself working closely with them on a daily basis without serious disputes occurring?  
• Do you both enjoy working collaboratively (or do you prefer independence?) 
• Are your goals for the business aligned? 

If you can answer ‘yes’ to most of these questions, it is worth exploring a partnership structure. However, if you answer ‘no’ to most these questions, going it alone may be the better option.  

Remember that business structures can be changed further down the line if required. If you begin as a sole trader and later discover a business partner would benefit to the business, it is perfectly possible to evolve in this way.  

If setting up a partnership or moving from a sole trader to partnership structure, you should take legal advice and adopt a partnership agreement to ensure partners have shared clarity on their duties, responsibilities and agreed share of the profits.  

Sole traders and business partnerships can also incorporate in future if it becomes advantageous to the business. For a comparison between sole traders and limited companies, see our article here. 

TaxAssist Accountants can help you decide 

Unsure whether to be a sole trader or enter a partnership? Speak to your local TaxAssist Accountant for personalised advice on 020 3859 0575 or using our contact form here. 

Last updated: 26th September 2025