A sole trader is the simplest way to run a business: one individual owns the enterprise, keeps all the profits and is personally responsible for all the debts. There is no legal separation between the owner and the business, so business income is taxed as the owner's personal income rather than through a separate corporate return.
The label changes across borders but the substance is similar. In the United Kingdom and Ireland you register as a sole trader with the tax authority and file a Self Assessment return. In the United States the same structure is called a sole proprietorship, reported on Schedule C of the individual Form 1040. Germany uses Einzelunternehmen, Italy the ditta individuale, and France the entreprise individuelle. In every case profits flow straight to the owner and are subject to progressive income tax plus social contributions.
For example, a UK graphic designer billing 45,000 pounds and claiming 5,000 pounds of expenses pays income tax and National Insurance on the 40,000 pounds profit, with nothing owed at the entity level.
The trade-off is unlimited liability. Many owners eventually switch to a limited company for protection and tax planning. See how the two compare with our country tax comparison, and read about being self-employed.