Sole Trader
This is a business where one person is the owner. Their business is unincorporated so the owner is ultimately personally liable for the business. Sole traders are able to control the business - make all of the decisions. This makes the business highly adaptable. However raising the capital for such businesses may be quite difficult because it is a risky option for investers.
These businesses are often quite small however the number of them is very large. Examples of these businesses are mostly found in the service sector such as electrical repair, retail shops, hotels and driving instructors.
The business is easy to set up, there is no formal procedures and operations can commence immediately (unless there is special permission required). The owner is able to decide the way which is the business he has the flexibility to restructure or dissolve the business as he sees fit. This enables the organisation to be quickly adaptable however competitors which are able to gain capital more quickly are more likely to succeed when there is a need to be more flexible.
Sole traders do not need to keep detailed accounting information however it may benefit them to as some groups such as lenders may require this information. They have to pay taxes themselves which does require them to keep some information.
Sole traders have unlimited liability which means that the law does not see them as separate from their business, there is no difference from the money of the business and that of the sole trader meaning that if the business occurs debts then so does the owner. This is a key factor to take on and failure may lead to the loss of possessions and bankruptcy.
Read more about this topic: Business Ownership Within England And Wales
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