What are the features of a sole trader?
- A sole trader is an individual who controls and manages a business
- The business is not a separate legal entity
- The individual is fully liable for all debts
What are the advantages of sole trader?
- Quick, inexpensive and easy to establish Inexpensive to wind down
- Not subject to company regulation
- Owner has total autonomy over business decisions
- Owner claims all the profits of the business and all the after-tax gains if the business is sold
- Common examples are plumbers, electricians, hairdressers and carpenters
What are the disadvantages of sole trader?
- Unlimited liability – bears full responsibility for business debts and legal actions such as negligence
- Limited by skill, time and investment of owner
- Restrictive structure due to non-legal status of the entity
- Business will cease to exist if owner leaves, retires or dies
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