Sole Traders

Question 1

Does a sole trader take responsibility for any debts a their business in-cures?

Answer 1

The business owner has the same legal identity as the business, and is therefore legally responsible for all of the businesses activities, including debts

Question 2

What is the definition of a sole trader?

Answer 2

An individual who owns and runs their own business. It is unincorporated, and therefore has unlimited liability.

Question 3

Can sole traders have employees?

Answer 3

Sole traders can employ people to work at the company, but legally, the employee is employed by the sole trader, and not the company, so if anything was to go wrong, and an employee got hurt during work, they would have to sue the sole trader.

Question 4

How would an employee sue the sole trader if they were injured at work (for example)

Answer 4

The employee is employed by the sole trader, and not the company, so if anything was to go wrong, and an employee got hurt during work, they would have to sue the sole trader.

Question 5

What are some advantages to being a sole trader

Answer 5

• Cheap and easy to set up
• Owner keeps all the profits
• Sole responsibility for decision making
• Financial records remain private
• Motivation is high - The success of the - individual and the business are both - - the same

Question 6

What are some disadvantages to being a sole trader?

Answer 6

• Unlimited liability
• Limited capital for investment
• Difficult to find cover when ill, or go - – on holiday - unless they have - —
• employees
• Employees may not get paid holiday
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