Sole Traders and Partnerships

• what is a sole trader?

  an individual who owns and runs their own business. the owner and business have the same legal identity
• what is a partnership?

  an unincorporated business where two or more people join together to set up a business
• what is a deed of partnership?

  a legal document that outlines the rules of a partnership
• what is an unincorporated business?

  a business structure that has not been registered as a seperate legal entity from its owner. there is no legal distinction between the tow
• what is an incorporated business?

  a business that has been formally registered so has a seperate legal structure from its owners
• what is unlimited liability?

  the owners of a business are personally responsible for the debts of a business
• what is limited liability?

  shareholders can only loose the amount invested in the business their personal assets cannot be liquidated to pay the businesses debts
• advantages of a sole trader

  • total control
  • can make all the decisions
  • keep all profit
  • quick and easy to set up
• disadvantages of a sole trader?

  • unlimited liability
  • hard to raise capital
  • limited savings/access to loans
  • may pay more tax than LTD
• advantages of partnerships

  • shared responsibility
  • better decisions making
  • different expertise
  • easier to raise finance
  • quick and easy to set up
• disadvantages of a partnership?

  • shared profit
  • conflict
  • unlimited liability
  • still hard to raise finance
  • may pay more tax than LTD