Sole Trading

In a sole trader business just one person owns the company and capital is raised by the proprietor himself, usually from a bank loan. This type of business carries with it a lot of paperwork, for example – accounts, ordering and assorted correspondence.

The business will always have unlimited liability. This means that if the enterprise fails the owner is responsible for all debts, and could end up selling all he/she owns to pay them off.

Advantages

• This type of business is easy to set up.
• It is very flexible. The owner has the freedom to run the company how he or she likes.
• The proprietor can offer a personal service.
• He/she can keep all the profits to himself/herself.
• Finances are kept private and accounting requirements are simple - the services of an accountant may not be needed.
• The business can be changed to suit local needs.

Disadvantages

• After normal trading hours, there still remains a lot of paperwork to be done, and only one person to do it. (You!)
• There is limited capital, so it is difficult to grow.
• Unlimited liability (see above).
• The owner must keep proper accounts.2

Examples of Sole Traders

• Window cleaners
• Some taxi drivers
• Freelance journalist