Sole Trader

Question 1

Advantages of sole traders

Answer 1

Easier to set up

Easier to run

Tax advantages

Control

Profits

Privacy

Labour relations

Flexibility

Finance

Question 2

How is a sole trade business “easier to set up”

Answer 2

Few legal requirements only need a license to trade from local authority (council).

(Saves time and money)

Question 3

How does a sole trade business have “control”

Answer 3

Owner makes all decisions themselves.

(Saves time and reduces conflict)

Question 4

How does a sole trade business “profit”

Answer 4

Owner can keep all profits. (Sole claim on profits)

(Unlike partnerships)

Question 5

How does a sole trade business have “finance” as a advantage

Answer 5

Cheap to set up- probably won’t need lots of money to start up as little equipment is needed etc. (usually bit doesn’t apply always.

Question 6

Disadvantages of sole traders

Answer 6

Unlimited liability

Lack of Continuity

Illness

Long hours

DIFFICULTY OF RAISING CAPITAL

LIMITED ECONOMIES OF SCALE

LIMITED SPECIALISATION

Only decision maker (leads to poor decisions) stress and pressure. Fall of motivation and productivity

Question 7

How is “unlimited liability” a disadvantage to sole traders

Answer 7

If a business goes bankrupt they are liable to pay back all debts incurred. May have to sell own personal assets to pay back debts.

Question 8

How is “long hours” a disadvantage of sole traders

Answer 8

Business is very dependant on one person, sole trader may have to work long hours to keep the business afloat.

Question 9

How is “limited specialisation” a disadvantage to sole traders

Answer 9

The business may only be run by 1 person so he has to do everything himself and will not have as much expertise in each area. Could employ people but it costs a lot of money.

Question 10

Formalities needed for

Answer 10

Income tax return

VAT registration

Trading licence

Limited liability