Who is a sole trader:

A sole proprietorship, also known as a sole tradership,

individual entrepreneurship or proprietorship, is a type of
enterprise owned and run by one person and in which there
is no legal distinction between the owner and the business
entity. A sole trader does not necessarily work alone and
may employ other people.
Advantages of being a sole trader:
• There were few legal regulations for him to worry about when he
set up the business.
• He is his own boss. He has complete control over his business and
there is no need to consult with or ask others before making
decisions.
• He has the freedom to choose his own holidays, hours of work,
prices to be charged and whom to employ (if he finds that he
cannot do all the work by himself).
• Mike has close contact with his own customers, the personal
satisfaction of knowing his regular customers and the ability to
respond quickly to their needs and demands.
• Mike has an incentive to work hard as he is able to keep all of the
profits, after he pays tax. He does not have to share these profits.
• He does not have to give information about his business to anyone
else – other than the Tax Office. He enjoys complete secrecy in
business matters.
Disadvantages of being a sole trader
• I have no one to discuss business matters with as I am the sole
owner.
• I do not have the benefit of limited liability. The business is not a
separate legal unit. I am therefore fully responsible for any debts
that the business may have. Unlimited liability means that if my
business cannot pay its debts, then the people I owe money to (my
creditors) can force me to sell all of my own possessions in order
to pay them.
• I want to expand the business by buying other taxis – but I do not
have enough money to do this. The sources of finance for a sole
trader are limited to the owner’s savings, profits made by the
business and small bank loans. There are no other owners who

can put capital into the business. Banks are often reluctant to lend
large amounts to businesses like mine.
• My business is likely to remain small because capital for expansion
is so restricted. My business is unlikely to benefit from economies
of scale. I cannot offer much training or opportunities for my
workers’ future careers.
• If I am ill there is no one who will take control of the business for
me. I cannot pass on the business to my sons – when I die the
business will legally not exist any longer. This is because there is
no continuity of the business after the death of the owner.