sole trader theory

Question 1

what is a sole trader?

Answer 1

this is a business owned by one person. It is the most popular type of business structure eg hairdressers

Question 2

outline 5 advantages of being a sole trader

Answer 2

• it is easy to set up
• the owner keeps all of the profits
• the owner makes all of the decisions eg where you locate the business
• this type of business offers a personal service
• sole traders business affairs are private

Question 3

outline 4 disadvantages of being a sole trader

Answer 3

• the business suffers from unlimited liability. This means if the business goes bankrupt the owner may have to sell their own personal possessions to pay off the debts
• there may be a lack of equity available as their is only one owner investing money into the business
• there may be a lack of expertise
• there may be a lack of ideas