Business studies chapter 4

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sole trader


  • Flexible - The entrepreneur can choose their working hours and for how long they want to work.
  • It is quick and easy to set up a business; not a lot of start-up capital is required.
  • Very easy to control and more control over business generally; the entrepreneur does not have to consult anyone before taking decisions.
  • The owner keeps all the profit.


  • It is hard to earn profit so one may have to work extremely hard before they can be successful.
  • May be very hard to earn finances and expand the business.
  • The business usually remains small, making it harder to compete with larger firms in the same industry. The business may never benefit from economies of scale.
  • The owner may lack the necessary skills of running a business.
  • The trader has *unlimited liability* for the business's debts.


Given it's convenience, it is no surprise that sole traders are the most common types of business organization. However, it also involves a lot of risk for the owner since the legal identities of the business and owners are not separate, and so the owner has unlimited liability for the business.


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