THE SOLE TRADER or SOLE PROPRIETOR

Question 1

What is a sole trader business?

Answer 1

One which is owned by one person. This person has put in
all the capital to start the business. This means that he/she bears all the risk and
also enjoys all the profits alone. This type of business is managed and operated by the sole trader (owner) alone or
he/she may employ other people to assist.

Question 2

What are the advantages of sole trader business?

Answer 2

1. 1the sole proprietor needs very little capital to start the business.
2. the business is easy to form because it requires a small amount of capital and
   sometimes no legal formality.
3. all profits belong to the sole trader alone.
4. decisions and new ideas can be put into operation quickly because he is his
   own boss.
5. the sole trader has a close personal contact with his employees and
   customers.

Question 3

What are the disadvantages of sole trader business?

Answer 3

1. the sole trader has to provide all the capital on his own.
2. it can be difficult to get a loan because he/she has very little resources.
3. the sole trader has unlimited liability. This means if the business goes
   bankrupt (fails) and he is unable to pay his debts, he may lose everything he
   owns.
4. the sole trader has to work long hours and may not be able to take a
   vacation.
5. when he/she dies, the business may have to close down as there may be no
   one to continue the business.
6. there are no partners to consult with, therefore, the sole trader stands on his
   own to make decisions whether they are right or wrong.