Business Studies Types of Business

These cards go through the Advantages and Disadvantages of each type of business

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  • Created by: Hollie
  • Created on: 08-01-09 11:27

Sole Trader

ADVANTAGES

  • The owner has complete control and makes all the decisions
  • All the profit is kept by the owner
  • Set-up costs are usually small, and there are no legal formalities
  • You are more likely to be motivates as it is your own business and you are personally responsible for it's success
  • It is a very flexible form of business and you can quickly switch you line of business if one idea is not successful


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disadvantages

DISADVANTAGES

  • Unlimited Liability - The owner is personally liable for the debts of the business. So, if the business fails and you owe money to your creditors (people a business owes money to, eg, a banks or supplier) then they can legally obtain your personal possessions (house, car) so that these can be sold to recover the debts you owe.
  • Difficult to raise money - Banks see sole traders as a risk and may not give them a loan as a result. You may have to prove yourself first with a strong business plan
  • Slow Growth - It can be difficult to grow at first, as you must establish a good reputation and a recognised name
  • There is a high risk of failure ( 30% of new businesses fail in their first year)
  • You can not afford to buy in bulk, so it is difficult to obtain stock cheaply so as to have low unit costs.
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