Sole Traders/Proprietors

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Sole Traders/Proprietors

Advantages

  • It is easier to keep overall control, because the owner has a HANDS ON approach to running the business and can make decisions without consulting anyone else.
  • The firms are usually small and easy to set up.
  • The wage bill will be low because there are few, or no, employees.
  • Only a small amount of capital has to be invested, which reduces the original set-up cost.
  • The owner keeps all of the profit, so it's not shared between workers.
  • The business has maximum privacy, so the financial information is kept strictly private.
  • It is easy to change your legal structure later if circumstances change.

Disadvantages

  • There is unlimited liability, which means that if the company is in debt, the owner is personally reliable for it .e.g. they may have to sell their belongings in order to pay it off.
  • Sole proprietors have no-one to share the business with. A good hairdresser, for example, may not be very good at handling the accounts.
  • Sole traders often work long hours and find it difficult to take holidays, or time off if they're ill.
  • Developing the business is also limited by the amount of capital personally available.
  • Your capacity to raise capital is limited.
  • The life of the business is limited.
  • You're taxed as a single person.
  • lack of continuity- the company will end automatically if the owner dies, retires or decides to sell the business.

Evaluation

I think that operating as a sole trader/proprietor is a positive thing because it allows the owner to have full control over the business, recieve all the profits and keep it private. Although, on the other hand, there are many disadvantages to this, which are shown above. I believe that it's more of a con being a sole proprietor, due to unlimited liability and lack of continuity.

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