Sole traders and Partnerships

Question 1

Sole traders

Answer 1

A business in which one person provides the permanent finance and in return has full control of the business and keeps all of the profits i.e.

Question 2

Partnerships

Answer 2

Partnerships are businesses owned by two or ore people with shared capital investment and usually shared responsibilities i.e. Dentist, Lawyers/ solicitors

Question 3

Pros of a partnership

Answer 3

Different opinions and expertise
Workload is lighter since it is shared
You can take breaks, holiday and vacations whenever you want
Shared decision making 
Additional capital can be raised 
Business losses share

Question 4

Cons of a partnership

Answer 4

You don’t keep all the profits
You don’t have full control of the business
Lack of job security
Indecisiveness and conflicts in opinions may slow down decision processes
Lack of continuity
Not possible to raise capital from selling shares
Unlimited liability- Most partnerships are unlimited not limited as it is expensive to set up so rare

Question 5

Pros of a sole trader

Answer 5

Keep all the profits
Have full control of the business
Can have breaks, holiday whenever you want in theory
Easy to set up- no legal formalities

Question 6

Cons of a sole trader

Answer 6

Unlimited liability
You may have to work long hours to manage workload
Don’t have anyone else to help you manage the business
Lack of job security
Lack of continuity- does not have a separate legal status (unincorporated) meaning you can’t pass the business on