What is the difference between a natural person and a legal person?
Natural person: A natural person is a human being. As human beings, we have rights, like the right to own property, enter contracts, and sue or be sued in our own names.
Legal person: A legal person (also called a legal entity), on the other hand, is not a human but a legal entity created by the law, like a company. Legal persons can also have rights and responsibilities, just like natural persons. They can own property, enter into contracts, and be held liable for their actions in a legal sense. However, they don't have physical existence like humans. They are represented by their designated legal representative (e.g. CEO).
What’s the difference between a Company/Corporation and a Sole Trader?
Company/Corporation/Business: A company or corporation is a type of legal person created by a group of people or an individual to run a business. It has its own name (e.g. Omnipresent) and its own identity. It is separate from its owners, which means that the company can own assets, make profits, and be responsible for debts or legal issues. The owners are shareholders, and they contribute part of their personal assets to own a part of the company/business.
Sole Trader: A sole trader is a natural person who owns and operates a business individually. The business and the individual are legally the same in the case of a sole trader, they are considered an extension of the natural person. Unlike a corporation, there is no separate legal entity created. This means that the sole trader personally owns all the assets and is responsible for all the debts and legal obligations of the business.
Why do contractors register as sole traders or business and not simply contract directly with the client as a natural person?
In certain countries, that is simply not allowed by law. You need to register as a legal entity in order to provide professional services.
Forming a legal entity can sometimes provide potential tax advantages.