Sole Trader. Image credit geograph.org.uk

Sole Trader. Image credit geograph.org.uk

ZIMSEC O Level Commerce: Sole Trader Business

Sole Trader

Features

  • Is owned by one person who provides all the capital.
  • Their motive is to make profit.
  • Tends to be small in size.
  • Has few legal formalities.
  • Easy to form as they require little start up capital.
  • Controlled and run on a daily basis by the proprietor himself.
  • Family members may sometimes provide labour.
  • Have unlimited liability.
  • Has flexible opening and closing hours.

Sources of capital

  • Own personal savings.
  • Borrowing from friends and relatives.
  • Loans and overdrafts from commercial banks.
  • Mortgage loans from Building Societies.
  • Retained Earnings.
  • Hire Purchase buying.
  • Leasing of fixed assets.
  • Purchasing goods for resale on credit.
  • Forming a partnership of a private limited company.

Advantages

  • Requires little start up capital.
  • Has fewer legal formalities.
  • Is easy to run and control.
  • There is close supervision of workers.
  • Operates for longer hours which may increase sales.
  • Offers personal service to customers.
  • There is quick decision making.
  • The business can quickly adapt to changes.
  • The owner enjoys profits alone.
  • Overhead expenses are usually lower.
  • The business affairs can be kept private.
  • Provides employment for the owner.

Disadvantages

  • Has unlimited liability.
  • Bears the losses and debts alone.
  • Decision making may be poor since there is no one to consult.
  • There is no room for specialisation.
  • There is limited room for expansion due to limited sources of capital.
  • There is no continuity after the owner dies.
  • Prices of goods are usually high.
  • The trader may be overworked.
  • Cannot borrow money from financial institutions due to lack of collateral.

To access more topics go to the Commerce Notes page


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