Sole trader

 Who is a sole trader?

Who is a sole trader?

A sole trader, also known as a sole proprietorship, is a type of business entity that is owned and operated by a single individual. This individual is solely responsible for all aspects of the business, including management, operations, and finances.

10 features of a sole trader

  • Simplest form of business structure
  • Operated by an individual under their own or a registered business name
  • Owner is personally liable for all business debts and obligations ( unlimited liability)
  • Complete control over business decisions
  • Retains all profits generated
  • No legal separation between personal and business assets
  • Responsible for all regulatory and tax compliance
  • Common among freelancers, independent contractors, and small-scale entrepreneurs
  • Typically requires minimal startup costs and administrative burden
  • Often involves direct interaction with customers, fostering personal relationships

10 Advantages of a sole trader 10 disadvantages of a sole trader
Complete control over business decisions Unlimited liability
Simple and inexpensive to establish Limited access to capital
Direct access to all profits Burden of all business responsibilities
Minimal regulatory compliance Lack of continuity
Personal satisfaction and independence Difficulty in raising funds
Flexible working hours Limited managerial expertise
Ease of decision-making Higher risk of burnout
Direct relationship with customers Personal assets at risk
Privacy of business affairs Difficulty in attracting and retaining talent
Quick adaptation to market changes Limited growth potential

Few examples: 

  • Freelance graphic designer 
  • Independent consultant 
  • Local bakery owner 
  • Self-employed plumber 
  • Sole proprietor of a small retail store

Multiple Choice Questions

Question 1: What is a sole trader?
A) A business owned and operated by a single individual
B) A business owned by multiple partners
C) A corporation with shareholders
D) A government-owned entity
Explanation: A business owned and operated by a single individual.
Which feature best describes the liability of a sole trader?
A) Limited liability
B) Shared liability
C) No liability
D) Unlimited liability
Explanation: Unlimited liability .
Question 3: Who retains all the profits generated in a sole proprietorship?
A) Shareholders
B) The owner
C) The government
D) Partners
Explanation: The owner .
Question 4: What kind of control does the owner have in a sole trader business?
A) Partial control
B) Complete control
C) Shared control
D) No control
Explanation: Complete control.
Question 5: Which of the following is a common example of a sole trader?
A) Public limited company
B) Large corporation
C) Independent contractor
D) Non-profit organization
Explanation: Independent contractor

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