Sole Traders and Partnerships

• What is a sole trader?

  A sole trader is a single person who is the exclusive owner of a business.
• What is the legal structure of a sole trader?

  A sole trader has no legal distinction between personal and business assets.
• What are the profit rights of a sole trader?

  A sole trader is entitled to keep all of the profits after tax.
• What is the liability of a sole trader regarding business debts?

  A sole trader is personally liable for the business's debts.
• What are the advantages of being a sole trader?

  • Easiest type of business to set up
  • Sole trader is their own boss
  • Sole trader decides what to do with profits
  • Easy to change legal structure if needed
• What are the disadvantages of being a sole trader?

  • Unlimited liability for debts
  • Hard to raise finance
  • All responsibility for decisions rests with the sole trader
  • Harder to retain good employees
• Why is unlimited liability a disadvantage for sole traders?


  Because there is no legal distinction between the sole trader's assets and the business assets.
• Why might banks see sole traders as riskier?

  Because it can be hard for sole traders to raise finance.
• How can sharing decision-making improve performance for a sole trader?

  Having someone to share decision-making can improve performance.
• Why might it be harder for sole traders to retain good employees?

  Because employees aren't necessarily given a share of the profits.