Evaluate sole trader as a form of business organisation.

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  • Created by: jerd
  • Created on: 10-05-23 19:02

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Advantages

  • low-start up costs - most are relatively inexpensive with few legal requirements + so can start almost immediately
  • profits - all wholly owned by sole trader
  • control - sole trader makes all decisions (whether correct or not)
  • finances private - not legally required to publish financial statements
  • flexibility - face least gov. regulation + are better equipped to adapt to changing economic conditions

Disadvantages

  • unlimited liability - trader is personally responsible for debts
  • raising capital - banks are reluctant to lend money to individuals who have no credit rating + high probability insolvency
  • work long hours - often to ensure business is successful + more often they are only person working + are unable to refuse work at any time
  • lack of expertise - often have few basic skills (lack of skills leads to most sole trader business failures)
  • competitive - normally charge higher prices as small businesses unable to take advantage of discounted materials

Evaluation

- 1 owner  - 0 to any no. employees      Sole traders are required to register as self-employed with the Inland Revenue + complete annual self-assessment tax forms.

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