Property, Finance and Distribution of the Assets

A sole trader is required to keep accounts of his/her activities. Transactions related to the business are recorded in the accounts in order to keep the business and the private economy of the sole trader separate. Based on the accounting, for example, taxation of business activities is carried out. As a general rule, sole traders can keep their accounts on a simple, i.e. contributory, basis.

A sole trader can only pay out salaries to his/her employees, and not to himself/herself. Instead, a sole trader can withdraw money from his or her business in the form of “personal loans”. There is a difference between personal withdrawals and the payment of wages, for example in terms of taxation.

The separation of the business assets of a sole trader and his/her personal assets is only made in the accounting. This means, for example, that creditors are not obliged to recover their claims first from business assets, and in this sense there is no distinction between personal assets and business assets. A sole trader is personally liable for all obligations incurred in the course of his business, since a sole trader is not a legal person separate from the entrepreneur, as is, for example, a limited company.