• The owner has absolute control over the business.
• The business can be established without any legal formalities other than informing (in the UK) HM Revenue and Customs within three months of starting.
• Personal supervision by the owner may result in a better service to customers and clients.
• The owner does not have to reveal the financial results of the business to the general public.
However, there are also disadvantages, including the following:
• The owner has personal liability for all the debts of the business, without limit.
• Total control and personal supervision usually require long hours and very hard work.
• There is no co-owner with whom to share the problems and anxieties associated with running the business.
• If the owner is absent from the business due to sickness or other reasons, this may have a serious effect on the state of the business.
• Future prospects for expansion are restricted, as they depend on the owner's ability to raise finance.
The main sources of finance for a sole trader are:
* These comprise sole proprietorship, partnerships without employees, and companies with only one employee·director.
• Capital introduced by the owner
• Loans from friends and family
• Bank borrowings, through overdrafts or loans
• Profits ploughed back into the business.
Although many people prefer independence and quite happily continue as sole proprietorships, it is extremely difficult to expand a business without also increasing the number of people who own it. The main choice for sole proprietorship wishing to convert to or form multi-ownership enterprises is between a partnership and a limited liability company.
Elmer Tamayo is the author of myaccountinginfo.net who took-up his degree of "BS in Accountancy" major in accounting. A Web designer and blogger, His passion is Reading books, searching new tech update on the world wide web. Read More...
