Advantages Of Sole Traders
Advantages of Sole Traders
It is easy to set up a sole trader. A person can set up a business immediately.
There are few, if any, forms to fill in or procedures needed to set.
Easier to run than any other types of business. The owner is in sole charge, easier in terms of decision making.
Tax Advantages
Taxed differently eg. NI contributions are low
There are no legal fees to set the firm
Control
The owner is in sole charge – can make whatever changes they want
No meetings required to implement
Capital
a business nearly always needs some capital to start trading
However, the amount of money needed to set up a sole proprietorship is often small
All the profits of the business are kept by the owner
Effort = reward
The harder the sole trader works, the more successful the business becomes, more can be earned
Privacy
Only the Inland Revenue & Customs and Excise need to know about the finances of a sole trader
Don’t have to publish information which could be seen by the public or by rivals
Disadvantages of Sole Trader
Unlimited Liability
If the business does very badly and has lots of debts, as a sole trader you must pay off these debts even if it means selling all your possessions, like a car
Lack of continuity
The sole trader IS the business, it may not survive if the sole trade stops work
There may be no one for you to sell it off to or even to pass it on to
Illness
The business may stop if the sole trader is ill
They would have to close the shop and consequently could lose income and profits
Long Hours
Sole traders work really long hours to keep their business afloat
Limited Specialisation
Sole traders carry out jobs in the business themselves
Larger firms can afford to buy in specialist workers, sole traders may not gain advantages related top specialisation
Limited economies of scale
Higher average costs than larger businesses.
Unable to gain economies of scale – don’t get the same discounts
Difficulty of raising capital
May have to borrow the money
It is easy to set up a sole trader. A person can set up a business immediately.
There are few, if any, forms to fill in or procedures needed to set.
Easier to run than any other types of business. The owner is in sole charge, easier in terms of decision making.
Tax Advantages
Taxed differently eg. NI contributions are low
There are no legal fees to set the firm
Control
The owner is in sole charge – can make whatever changes they want
No meetings required to implement
Capital
a business nearly always needs some capital to start trading
However, the amount of money needed to set up a sole proprietorship is often small
All the profits of the business are kept by the owner
Effort = reward
The harder the sole trader works, the more successful the business becomes, more can be earned
Privacy
Only the Inland Revenue & Customs and Excise need to know about the finances of a sole trader
Don’t have to publish information which could be seen by the public or by rivals
Disadvantages of Sole Trader
Unlimited Liability
If the business does very badly and has lots of debts, as a sole trader you must pay off these debts even if it means selling all your possessions, like a car
Lack of continuity
The sole trader IS the business, it may not survive if the sole trade stops work
There may be no one for you to sell it off to or even to pass it on to
Illness
The business may stop if the sole trader is ill
They would have to close the shop and consequently could lose income and profits
Long Hours
Sole traders work really long hours to keep their business afloat
Limited Specialisation
Sole traders carry out jobs in the business themselves
Larger firms can afford to buy in specialist workers, sole traders may not gain advantages related top specialisation
Limited economies of scale
Higher average costs than larger businesses.
Unable to gain economies of scale – don’t get the same discounts
Difficulty of raising capital
May have to borrow the money