Podcast
Questions and Answers
What is the main disadvantage of being a sole trader?
What is the main disadvantage of being a sole trader?
Limited liability
What happens to a sole trader business when the owner gets ill or quits?
What happens to a sole trader business when the owner gets ill or quits?
It will cease to exist
What is one advantage of being a sole trader in terms of decision-making?
What is one advantage of being a sole trader in terms of decision-making?
Owner has complete decision-making control
Explain the concept of unlimited liability as it relates to a sole trader business.
Explain the concept of unlimited liability as it relates to a sole trader business.
Signup and view all the answers
Discuss the impact of limited access to capital on a sole trader business.
Discuss the impact of limited access to capital on a sole trader business.
Signup and view all the answers
How does the limited lifespan of a sole trader business affect its sustainability?
How does the limited lifespan of a sole trader business affect its sustainability?
Signup and view all the answers
Study Notes
Sole Trader Business
- The main disadvantage of being a sole trader is the unlimited liability, which means personal assets are at risk in case of business debts or failures.
- When a sole trader gets ill or quits, the business ceases to operate, as it is entirely dependent on the owner's presence and efforts.
- One advantage of being a sole trader is the absolute decision-making authority, allowing for quick and independent decisions without needing approval from others.
Financial Constraints
- Unlimited liability exposes the sole trader's personal assets to financial risks, making it challenging to secure loans or investments.
- Limited access to capital restricts the business's growth potential, as sole traders often rely on personal savings or limited funding sources.
- The limited lifespan of a sole trader business affects its sustainability, as the business's existence is tied to the owner's ability to operate it.
Sustainability and Risks
- The limited lifespan of a sole trader business makes it challenging to maintain long-term relationships with customers, suppliers, or employees.
- Unlimited liability and limited access to capital create significant risks for the sole trader, making it difficult to sustain the business over time.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
Test your knowledge on sole traders, individuals who own and run a business on their own. Explore the advantages, disadvantages, and characteristics of being a sole trader.
