Sole Trader Basics
What is the simplest form of business organization, owned and controlled by one person?
Sole Trader.
What is a partnership?
A business formed by two or more people who share responsibility for running it.
What advantage does a sole trader have in decision-making?
Complete control over decisions.
What is a business called if it is incorporated and has limited liability?
Limited company.
Name two reasons new businesses are more likely to fail than older businesses.
Lack of experience and difficulty raising funds.
Name one reason why people become sole traders.
To be their own boss or use their skills and interests.
In what industries are partnerships most common?
Law, accounting, dentistry, and other professional fields.
Complete control over decisions.
More people can invest in the business.
Name a business type that is unincorporated with unlimited liability.
Sole trader or partnership.
What does it mean if a business is "unincorporated"?
It is not a separate legal entity from its owners.
What is the biggest financial risk for sole traders?
Unlimited liability (risk of losing personal wealth).
What liability do partners share in a partnership?
Unlimited liability.
What disadvantage do both sole traders and partnerships share when competing with large businesses?
It is difficult to compete with larger businesses.
What does "unlimited liability" mean?
Owners are personally responsible for all business debts.
Name one reason why some businesses remain small.
Lack of capital or owner's preference for simplicity.
What happens to a sole trader’s business if the owner dies or retires?
The business stops.
What happens to a partnership if one partner dies or retires?
The business stops or needs reorganization.
How does sharing decision-making benefit partnerships?
It often leads to better decisions.
What is the key difference between a private limited company and a public limited company?
Public limited companies can sell shares on the stock market; private limited companies cannot.
How does unlimited liability affect business risks?
Owners risk their personal wealth to cover business debts.
Name two disadvantages of being a sole trader.
Difficult to raise funds and long working hours.
What legal document outlines the responsibilities of each partner?
A partnership agreement.
Why might sharing profits be a disadvantage in a partnership?
Partners might feel unfairly compensated for their contributions.
Give one advantage and one disadvantage of limited liability.
Advantage: Protects personal assets. Disadvantage: Can make raising initial capital harder.
Name one way partnerships address disadvantages of sole traders.
Shared workload and decision-making.