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A Sole Trader
A Sole Trader
It means
that the business is owned and run by one person - though the business may employ a large
number of people. The owner will normally provide the money to set the business up, but he or
she could borrow money from a bank or other financial institution. The first likely objective of
the sole trader will be survival as many new businesses run out of money in their first few
months of trading.
They are usually small businesses, so less money is required to set them up;
The owner is in sole charge so quick decisions can be made without having to consult
others;
The owner gets to keep all of the profits, they don't have to be shared with others;
The needs of local people can be catered for as can special tastes as the owner will know
the local market.
Many sole traders work very long hours, as they may be the only ones who work for the
business. It may be the case that they are motivated to work long hours because they are working
for themselves and they will get the extra profits from their extra work.
Money can be difficult to raise as many banks and other lending institutions will be reluctant to
lend to sole traders because they have a higher rate of bankruptcy.
Their prices are often higher than those of larger organisations. This is because sole traders tend
to be small and are unable to buy in bulk and benefit from lower prices. Sole traders often join
voluntary groups (such as Spar, VG, Mace and Londis) in order to be able to buy in bulk.
The biggest disadvantage for the sole trader is that s/he has complete responsibility for all the
debts of the business. This is called unlimited liability. This means the owners can lose all of
their personal possessions if they can not pay the debts of the business, i.e., it goes bankrupt.