THE SOLE TRADER

A Sole Trader is a type of organisation that is owned by one person, such as Sid the potter.

This type of organisation has unlimited liability. Explain what this statement means. Use an example.

Explain three ways that a Sole Trader could raise finance (the money to start up or expand the firm).

1 / Use his or her own savings.
2 / Obtain a bank loan.
3 / Borrow money from friends or family.

Explain three things that could happen to the profits which are made by Sole Traders.

1 / They are used by the sole trader as an additional form of income.
2 / The profit is reinvested in the business.
3 / Paid to the Government in the form of tax.

The Advantages and Disadvantages of being a Sole Trader

Using the following terms, put the word in bold into the correct column. Write a short explanation or example under each advantage or disadvantage:

Who has control of the firm, unlimited liability, what happens to profits, easy to start up and close down, flexible, can be long hours, raising the finance, continuity in event of illness/holidays/death.

Advantages / Disadvantages
1. Control
The sole trader has complete control over the business. He or she can make all the important decisions concerning the firm.
2. Profits
The sole trader can do as he or she pleases with the profits of the firm.
3. Flexible
The firm can change the nature of its business very quickly. It can react promptly to changes in the customers’ tastes and preferences.
4. Start up and close down
It is not difficult to start up or close down a sole trader. There are few laws regarding the documentation or procedures involved. / 1. Liability
If the sole trader goes bankrupt, then his or her personal possessions may have to be sold in order to pay the debts of the firm.
2. Long hours
Sole traders often have to work very long hours, with paperwork to do at the end of every month.
3. Continuity
If the sole trader is ill or has a holiday, the business is often unable to trade. If the sole trader dies, then the firm ends.
4. Finance
It is often difficult for sole traders to raise the money to start or to expand the firm. The only way is often to take out another mortgage on the family home.
In the UK, what percentage of firms are Sole Traders? 0.5%, 3%, 40%, or 85%. / 40%
They account for what % of the turnover of all UK firms? 0.5%, 3%, 40% or 85%. / 3%
A Sole Trader can employ as many people as required. True or False / True
A Sole Trader pays tax, should he or she earn enough money. True or False / True