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Business protection opportunities: sole traders and sole proprietors

19/11/2025

Marcus Primhak, National Account Manager

According to the Office for National Statistics, there are around 4 million sole traders and sole proprietors in the UK1. That’s a huge proportion of the working population and a group with unique protection needs that are often overlooked.

“As an adviser, this presents a valuable opportunity. Many of your self-employed clients could benefit from tailored protection to help safeguard both their business and their loved ones.”
Marcus PrimhakNational Account Manager

What we consider to be a sole trader vs. sole proprietor

Sole traders (also described as self-employed or a “one man band”)

 

  • Individuals who run their own business in their own name.
  • Personally responsible for all business commitments and liabilities – contracts, debts, employee obligations etc.
  • No legal separation between the individual and the business.

Sole proprietors

 

  • A limited company where the shares are owned solely, or on majority basis, by one individual.
  • The company is its own legal entity, but personal guarantees or loans can still mean the individual bears some financial risk.

 

Both groups face similar challenges if something expected happens, particularly if the business depends heavily on one person.

Sole traders: personal responsibility, business risk

There are around 3.2 million sole traders in the UK2 – more than any other business structure. While many run small operations, a significant number (6.4%) employ staff and some even manage teams of over 50 people2. Sole traders operate across every sector, often meeting the same regulatory, contractual and insurance requirements as larger firms.

The key difference is that the sole trader carries all of this personally. There’s no company structure to shield them from financial or legal responsibility. If trading conditions worsen, or if an employee claim arises, it’s the individual who is accountable. 

That’s why business protection is so important for sole traders. A well-structured plan can provide essential financial support if the individual falls ill, passes away or can no longer work – ensuring the business can meet its commitments and the family isn’t left exposed.

There are around 4 million sole traders and sole proprietors in the UK

What happens when a sole trader passes away?

When a sole trader passes away, their next of kin becomes responsible for any ongoing business affairs. This can include:

  • Managing staff and suppliers.
  • Handling contracts, leases and insurances.
  • Meeting any legal or financial obligations.
  • Deciding whether to wind down or continue the business.

Even if the estate limits personal liability, families often feel a moral obligation to close the business properly by making redundancy payments to staff, completing work or honouring agreements. Others may wish to keep the business going, transferring ownership or even incorporating it as a limited company.

 

Having business protection in place can make these choices far less stressful. It can provide the funds needed to settle obligations, buy time to make decisions or support a smooth transition.

Sole proprietors: the business lives on

For sole proprietors – those who own all or most of a limited company – the situation looks slightly different. When they pass away, the company doesn’t stop trading. As a separate legal entity, it continues under new ownership (typically the deceased’s next of kin).

But that transition can be complex. The family will need to:

  • Value the business and notify HMRC and Companies House.
  • Update banks, suppliers and customers.
  • Decide whether to sell, wind up or continue trading.

Business protection can help by providing financial breathing space – whether through a key person policy or life cover designed to keep the business stable during uncertain times.

Why protection matters

Whether your client is a sole trader or a sole proprietor, their business often represents years of hard work and the main source of income for their family.

If the unexpected happens, protection can ensure their loved ones aren’t left with overwhelming stress, complex administration or financial loss. It allows them to keep the business running temporarily, manage or settle outstanding obligations and make confident decisions about the future.

As an adviser, you’re in a unique position to identify these needs, as many self-employed clients won’t realise that their business and personal finances are so closely intertwined. Introducing business protection can help them safeguard both, while helping you build deeper, more valuable client relationships.

At LV= we’re proud to be able to support advisers through every step of their business protection journey with tools, training and business development ideas to ensure they can protect as many clients’ businesses as possible.

 

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