If you have decided on the type of business you want to start, you have to decide on the type of ownership.
Each one has is advantages and disadvantages.
We will have a look at the different types and we will start with
Sole owner
The sole proprietorship is the simplest business form under which one can operate a business. The sole proprietorship is not a legal entity. It simply refers to a person who owns the business and is personally responsible for its debts .
Characteristics of Sole trader
1. The business is owned by one person.
2. This is a small business so it is controlled by the owner. Even if he has somebody else to help, the decision is final with the owner.
3. The money needed to start the business comes from the owner. He either has it saved or borrow it from a financial institution which he will have to pay back.
4. The owner is responsible to pay back his own debt.
He bears all the risks and nobody else has any stake in the business. The creditor can lay claim not only on his business assets but also his personal property such as car, houses, furniture etc to recover the loan.
5. The owner is in contact with his clients and he knows their wants and needs and will attend to it.
6. The business can be opened or closed by the owners dicresion.
7. The business can be closed for ever for business whenever the owner feels like it.
8. If the owner dies and there is nobody to carry on with the business, it will stop to exist.
9. The owner of the business is responsible for the debt.
10. Sole traders are not compelled by law to audit the business and statements.
Advantages of a Sole Trader
1. There are no restrictions on the amount of money that goes into the business.
2. The owner has full control over the business for all the day to day running and how big the business will grow.
3. Not a lot of paperwork is required to start this business.
4. The owner gets all the profit made by the business and may own assets like a vehicle etc.
5. Decision can be made quickly because the owner do not have to consider others.
6. Sole traders has a more personal relationship with their customers.
Disadvantages of a Sole Trader
1. The owner is responsible for all the debt of the business.
2. The personal property of the owner can be taken if debt is not paid.
3. It is more difficult to get a loan.
4. It may be difficult to get larger jobs, since bigger companies have more workers.
5. If the owner is sick or dies the business will most likely shut down.
Tomorrow we will continue wish these lessons and have a look at Partnership.
@tipu curate
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