M1 Analyse Why A Sole Trader Might Want
M1 analyse why a sole trader might want to become either a partnership or a private limited company.
Sole Trader
Sole trading is where a person decides to set up a business on their own. They may employ people but there is only one owner. Most people can set up a small business if they wish, as there is no complicated paperwork and it is a straightforward process - you don't need to do anything except start trading. Most small businesses are sole traders. Examples could be: plumbers, hairdressers, electricians, newsagents and other small shop retailers.
Advantages of being a sole trader:
1. They are easy and quick to set up.
2. They are their own boss. Some people leave their own job and set up on their own so that they can work for themselves.
3. They get to keep all of the profits, and they alone decide what is done with the profits. They may decide to re-invest them back into the business to help it grow.
4. They get to make all the decisions about how the business is run, which means they have full control of the business.
5. They get to decide what to sell or what services to offer.
Disadvantages of being a sole trader:
1. They are unincorporated. This means that the business is not legally separate from its owner. So if someone sues the business, they sue the sole trader personally. This could lead to large court costs.
2. They have unlimited liability. This means that if the business goes bankrupt, they may have to sell their own personal possessions (such as house or car) to pay the debts of the business.
3. They may have to work long hours, and they may not get many holidays. If there is no one else to cover, the business may have to close when the owner is ill or wants a holiday, which means no income during that time.
4. They may not have any one to share ideas with, so the potential success and growth of the business may be limited.
5. They may have limited finance as there is only one owner who can put money into the business. This may be a large
Sole Trader
Sole trading is where a person decides to set up a business on their own. They may employ people but there is only one owner. Most people can set up a small business if they wish, as there is no complicated paperwork and it is a straightforward process - you don't need to do anything except start trading. Most small businesses are sole traders. Examples could be: plumbers, hairdressers, electricians, newsagents and other small shop retailers.
Advantages of being a sole trader:
1. They are easy and quick to set up.
2. They are their own boss. Some people leave their own job and set up on their own so that they can work for themselves.
3. They get to keep all of the profits, and they alone decide what is done with the profits. They may decide to re-invest them back into the business to help it grow.
4. They get to make all the decisions about how the business is run, which means they have full control of the business.
5. They get to decide what to sell or what services to offer.
Disadvantages of being a sole trader:
1. They are unincorporated. This means that the business is not legally separate from its owner. So if someone sues the business, they sue the sole trader personally. This could lead to large court costs.
2. They have unlimited liability. This means that if the business goes bankrupt, they may have to sell their own personal possessions (such as house or car) to pay the debts of the business.
3. They may have to work long hours, and they may not get many holidays. If there is no one else to cover, the business may have to close when the owner is ill or wants a holiday, which means no income during that time.
4. They may not have any one to share ideas with, so the potential success and growth of the business may be limited.
5. They may have limited finance as there is only one owner who can put money into the business. This may be a large