5a Soletraders

Question 1

What is a sole trader?

Answer 1

A business a single person owns and runs.

Question 2

What is the legal status of a sole trader?

Answer 2

The trader and the business are the same legal entity.

Question 3

What are the advantages of a sole trader?

Answer 3

1. Profits belong to owner.
2. No formal procedures to set up - no need to register at CoHo.
3. Independent - no need to gain approval from anyone.
4. Self-accountability - no need to disclose info about the company

Question 4

What are the disadvantages of a sole trader?

Answer 4

1. Huge risk - business’ debts are your debts.
2. Limited options to finance - any loans will have to be personal.
3. High dependence on the owner - if the owner is ill, the business will die with them.
4. Success of the business is limited to the owners skills should they not hire anyone.