Sole Traders

Sums up sole traders

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  • Created by: naomi
  • Created on: 23-03-10 20:46

Definition

  • A sole trader business is one that is fully owned by one individual


  • The owner can employ other staff but the owner has full responsibility and ownership of the business.
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Advantages

Business affairs are private- competitors cannot see what you are earning so will know less about how you are working and how it is succeeding.

Easy to set up

Employees can be hired when you get busy and you can keep a tight grip on the business

Cheap to start up with few forms to fill in and no specialist services need to be hired other than having a bank account and informing the tax offices

All profit is kept by the owner

Decisions are made by the owner

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Why are they successful?

Specialist services can be offered e.g. repair services

Sensitivity can be shown to the customers needs since they are closer to the customer and will react more quickly

Community trust- if people in the local area can see the owner they feel more comfortable because they can hear their views

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Legal Requirements

  • Keep proper business accounts and records for the Inland Revenue (who collect tax on profits) and VAT accounts if necessary


  • Comply with legal requirements that concern protection of the customers- Sales of Goods Act for example
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Disadvantages

CUUDLE

Capital must be raised either from savings or loan

U- has Unlimited Liability= liable for all debts. If end up bankrupt, assets may be sold to pay creditors (people you owe money to) in order to pay off debts. A lot of risk is involved

Unable to run if owner is ill or on holiday (unless there are employees)

D- If the owner dies the business closes= lack of continuaty

L- banks may be less eager to lend money

E- May be difficult to enjoy economies of scale eg may not be able to buy in bulk and get the same discounts as larger businesses

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