Most people think of businesses as being an entity in their own right - and this is true, Limited Companies are legally a separate entity. However, an individual can also be a business. The term sole trader defines this.
The sole trader is essentially a self employed person running a trade (or more) as business. If the trade incurs losses, they are personally also losing money, as well as being liable to any debts.
Legally a sole trader is responsible directly for making sure that their reporting requirements are responsibly met. The requirements differ from companies as in there isn't any need to formally report internal cashflows, balance sheets and profit and losses. The accounting work is limited to what is required for business planning and what is mandated by HMRC for tax reporting requirements.
A sole trader therefore must make sure all business related invoices, bills etc. are recorded and stored for possible inspection.
This is one of the main advantages, the lowered administrative hurdle. Aside from tax administration, the main thing being the 'self assessment tax return', and possibly 'payroll' and 'vat', the sole trader will have less costs for admin.
A business can be set up quite quickly with just a notification to the taxman. You can do this by registering as self-employed (which can be done online), then you're on your way!
Contractors who operate as sole traders (Self employed businesses) can completely avoid the headache and worry associated with IR35. IR35 rules target Personal Service Companies, PSCs, which are incorporated limited companies. A sole trader cannot avoid taxes or structure taxes in a way a limited company can. Sole traders profits are liable to income tax and class 4 national insurance. Companies, however, pay corporation tax and can then structure how to distribute their net profits.
The biggest pitfall of being a sole trader is part and parcel of its main benefit. The lowered administrative burden of handling a separate entity of the limited company means all debts and liabilities are the company's responsibility - the individual directors are (in most cases) shielded. A sole trader would however be personally chased for the liabilities.
So, the liabilities of the business and the inability to structure profits in a tax-efficient manner are the main disadvantages, whilst the lowered administrative costs and burdens are the benefits of being a sole trader.
There are many ways to extract money from a company, however a sole trader only has a single method of profit extraction.