Define a sole trader.

Sole traders, partnerships, private and public limited companies, franchises, social enterprises, lifestyle and online businesses, limited and unlimited liability, and the benefits and drawbacks of stock market flotation.

What you need to know

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Key term

What are a sole trader and a partnership, and what liability do they carry?

Key term

What does limited liability mean for a shareholder?

Key term

How does a PLC differ from a private limited company?

Evaluation

What does a franchisee gain from the franchisor?

Questions from this subtopic

Each one with the model answer underneath.

1
Define a sole trader.
Model answer
A business owned and controlled by one person who has unlimited liability for all business debts.
2
What does unlimited liability mean for a sole trader?
Model answer
The owner is personally responsible for all business debts, meaning personal assets can be used to pay off what the business owes.
3
What is a partnership?
Model answer
A business owned by two or more people who share responsibility, profits, and unlimited liability.
4
In a partnership, what type of liability do the partners face?
Model answer
Unlimited liability — each partner is personally responsible for the debts of the business.
5
Define a private limited company (Ltd).
Model answer
A business with a separate legal identity from its owners, where shares are sold privately and cannot be traded on the stock exchange.
6
Why can't shares in a private limited company be bought by the general public?
Model answer
Because shares are sold privately and cannot be traded on the stock exchange.

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