Sole traders_worksheet.docx

Being a sole trader requires some specific qualities. Although being a sole trader requires lots of hard work and commitment, there are several benefits: It is very easy to set up a sole propertiership. Sole traders are only required to keep proper business accounts for the Inland Revenue and VA...

Being a sole trader requires some specific qualities. Although being a sole trader requires lots of hard work and commitment, there are several benefits: It is very easy to set up a sole propertiership. Sole traders are only required to keep proper business accounts for the Inland Revenue and VAT accounts if sales reach a certain amount. The sole trader has complete control over the business and the runs it the way he/she wants to. Therefore no-one else can tell you what to do. As a sole trader there is no need for large amounts of investment and capital. The sole trader gets to keep all the profit of the business. The profit is the remainder of the amount of money that a business receives and the costs of running the business. The sole trader is doing a job he/she enjoys and obtains job satisfaction. Although there are lots of positive benefits of being a sole trader, there are several disadvantages: A sole trader has UNLIMITED LIABILITY. This means that the sole trader is personally responsible for all the debts and losses that the business may make. If a sole trader is thinking about expanding, he/she may face difficulty, as often the banks are not interested in investing money in small businesses. If the sole trader dies the business cannot be passed to another person. If things go wrong there may not be anyone who can help. There may be lots of competition and the risks of failure are greater. Scenario You are a business advisor. Kiara also studied a business course at College and understands that running a business requires a lot of organisation and patience. Kiara would like some advice. Explain the to term UNLIMITED LIABILITY to Kiara. Kiara would like to know what kind of business a sole propertiership is. Explain to her who would own her business. What is this other name for this kind of business ownership? From the information that you have about Kiara, do you think she possesses the qualities to be a successful sole trader? Kiara has been listening to the news. She is frightened by the prospect that a lot of small businesses are failing. Explain to Kiara the disadvantages of being a sole trader. Kiara does not have a lot of money to start up her business. She is thinking of using her savings to buy her equipment and starting of at home. Explain to her the advantages of being a sole trader. What aims and objectives do you think Kiara should set herself? Extension Questions Being a sole trader has an element of risk involved with it. How would it be possible for Kiara to reduce the risks she will be taking? Setting up a sole propertiership seems to easy to Kaira, she wants to know if there are any legal formalities involved. Using your own knowledge, can you advise or give Kiara some examples of some other businesses that are sole traders. You are thinking of becoming a sole trader. You want to set up your own Internet café. Explain what qualities that you will need for this business. Discuss unlimited liability would effect you. Describe the benefits that you would have running your own Internet café. Explain what difficulties you might face. What legal requirements will you need to fulfil.