These terms are often used interchangeably, and many of them may describe your particular circumstances. However, in the world of accounting and tax, some of these have more specific meanings than in everyday English.

There are different rules depending on whether you run your business through a company or not, and if you understand the terminology, this may help you understand which rules apply to you.

Entrepreneur

This seems to have no particular meaning in accounting/tax other than to refer to someone who has their own ideas for running a business, be it through a company or not.

Soletrader

This does have a specific meaning. A soletrader is someone who sets up a business, but who does not run this through a company. Generally, they act alone, but they may employ staff, or pay contractors to perform different aspects of a piece of work. However, if such a business man or woman agrees to work with someone else to grow the business, and these people will share profits then they may have formed a partnership, and each person is a “partner” rather than a soletrader. Many of the rules applicable for soletraders will also be appropriate for partnerships. Your accountant should be able to advise you if it seems that a partnership has developed.

Self-employed

A soletrader may describe him or herself as self-employed, given that he or she is the boss. This is also what HM Revenue & Customs (previously the Inland Revenue) mean when using the term self-employed. However, someone who owns his or her own company may also describe himself as such, but, for tax purposes, they would not be considered self-employed. Instead, in relation to that company they would be an employee, or more likely, a director of the company. They will probably also be a shareholder.

Shareholder

This does not describe the status of an individual in relation to how they earn, or work for their money, as the other terms above do. Instead, this is someone who owns shares. If I own a few shares in BT, for example, I will be a shareholder in BT. However, where you run your business through a company, you, the main worker, will also hold some or all of the shares in that company, and so by virtue of this, you will be a shareholder.

Of course, there are many other terms used in business to describe the owners and workers, for example, “consultant” and “freelancer” both generally relate to the self-employed.

Here we have just explained the terms – how the different business operations are taxed is the subject for another article.

As with all our information in The Business Lounge, this is not comprehensive tax advice, and may not apply to your specific circumstances; to discuss how these issues affect you, contact your accountant.