Key term
CCEA A-Level Professional Business Services 3210
The Business Environment
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The Business Environment
Sole traders and partnerships
- 3 things to know
- AS 1
Overview
Sole traders and partnerships, unlimited liability, control and profit, deeds of partnership, limited liability partnerships and a worked profit-sharing calculation.
What you need to know
Answer each one before you reveal it.
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Key term
How is a sole trader financed?
Key term
What does unlimited liability mean for a sole trader?
Questions from this subtopic
Each one with the model answer underneath.
- 1
What is a sole trader?
Model answer
A sole trader is a business owned and run by one person. The owner may employ staff but takes all the decisions and all the profit.
- 2
How is a sole trader financed?
Model answer
A sole trader is mainly financed by the owner's savings and retained profit. Bank loans, overdrafts and loans from family are other common sources.
- 3
What does unlimited liability mean for a sole trader?
Model answer
Unlimited liability means the owner is personally responsible for all the business's debts. Personal assets such as a house can be seized if the business fails.
- 4
How much control does a sole trader have?
Model answer
A sole trader has complete control over every decision. Decisions can be made quickly without consulting anyone.
- 5
What happens to a sole trader's profit?
Model answer
The owner keeps all the profit the business makes. The profit is taxed as the owner's personal income.
- 6
Give two disadvantages of operating as a sole trader.
Model answer
The owner faces unlimited liability for the business's debts. Raising finance is hard, and the business depends on one person's skills and health.
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