Sole trader

Who is a sole trader?

A sole trader, also known as a sole proprietorship, is a type of business entity that is owned and operated by a single individual. This individual is solely responsible for all aspects of the business, including management, operations, and finances.

10 features of a sole trader

Simplest form of business structure
Operated by an individual under their own or a registered business name
Owner is personally liable for all business debts and obligations ( unlimited liability)
Complete control over business decisions
Retains all profits generated
No legal separation between personal and business assets
Responsible for all regulatory and tax compliance
Common among freelancers, independent contractors, and small-scale entrepreneurs
Typically requires minimal startup costs and administrative burden
Often involves direct interaction with customers, fostering personal relationships

10 Advantages of a sole trader	10 disadvantages of a sole trader
Complete control over business decisions	Unlimited liability
Simple and inexpensive to establish	Limited access to capital
Direct access to all profits	Burden of all business responsibilities
Minimal regulatory compliance	Lack of continuity
Personal satisfaction and independence	Difficulty in raising funds
Flexible working hours	Limited managerial expertise
Ease of decision-making	Higher risk of burnout
Direct relationship with customers	Personal assets at risk
Privacy of business affairs	Difficulty in attracting and retaining talent
Quick adaptation to market changes	Limited growth potential

Few examples:

Freelance graphic designer
Independent consultant
Local bakery owner
Self-employed plumber
Sole proprietor of a small retail store

Multiple Choice Questions

Question 1: What is a sole trader?

A) A business owned and operated by a single individual

B) A business owned by multiple partners

C) A corporation with shareholders

D) A government-owned entity

Explanation: A business owned and operated by a single individual.

Which feature best describes the liability of a sole trader?

A) Limited liability

B) Shared liability

C) No liability

D) Unlimited liability

Explanation: Unlimited liability .

Question 3: Who retains all the profits generated in a sole proprietorship?

A) Shareholders

B) The owner

C) The government

D) Partners

Explanation: The owner .

Question 4: What kind of control does the owner have in a sole trader business?

A) Partial control

B) Complete control

C) Shared control

D) No control

Explanation: Complete control.

Question 5: Which of the following is a common example of a sole trader?

A) Public limited company

B) Large corporation

C) Independent contractor

D) Non-profit organization

Explanation: Independent contractor

Report Card

Total Questions Attempted: 0

Correct Answers: 0

Wrong Answers: 0

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