1.2 Types of organizations
1.2.1 The main types of business ownership
Sole Traders and Partnerships
sole trader
A sole trader is an individual running and operating his business
himself. It is the easiest and most practical form of business
structure. The sole trader has the complete control over the
business, makes all the decisions, and retains all the profits. On
the other hand, he is personally liable to pay for all the debts and
obligations by the business.
Sole Trader Advantages
Decision-Making: In decision-making aspects, exclusive, intimate
control in running the business is instigated by the solitary trader.
Decisions can thus be made quickly and without the compulsion
of consultation or approval from any other quarters.
Ease of Establishment: Establishment formalities for a sole trader
business are minimal, with least legal or administrative formalities
compared to the rest of the ownership structures. It often requires
less formality and less paperwork.
Operational Flexibility: A sole trader can easily change the way of
conducting business and strategies according to his or her whims
without adhering to the likes or rules set by any partner or
shareholder.
, Full Profits: The sole trader retains all the profits accruing from the
business; this is a direct financial reward for effort and success.
Confidentiality: A sole proprietor is not obligated to publish and
declare books of account or business details to the general public,
so privacy and confidentiality can be better retained.
Disadvantages of Sole Trader
Personal Risk: The business is solely dependent on the personal
capability and responsibility of the sole trader in incurring all
liabilities and debts. It follows that in case of failure or severe
liability, personal assets may be affected, such as a house and
savings.
Difficulty in raising capital: Raising capital is difficult as the sole
trader depends upon his personal savings, loans from friends,
relatives, and local banks, who prefer to have more options for
large funds.
Skill Constraints: This is because the business can fall behind in
diversified expertise, as all aspects of business rest on the sole
trader. This may also mean reduced growth and developments in
solving other business needs efficiently.
Operational Burden: The ownership of the business has to plunge
himself or herself into all business operations, which might include
administration, marketing, and customer service. Eventually, this
may mean a high workload and potential burnout.
1.2.1 The main types of business ownership
Sole Traders and Partnerships
sole trader
A sole trader is an individual running and operating his business
himself. It is the easiest and most practical form of business
structure. The sole trader has the complete control over the
business, makes all the decisions, and retains all the profits. On
the other hand, he is personally liable to pay for all the debts and
obligations by the business.
Sole Trader Advantages
Decision-Making: In decision-making aspects, exclusive, intimate
control in running the business is instigated by the solitary trader.
Decisions can thus be made quickly and without the compulsion
of consultation or approval from any other quarters.
Ease of Establishment: Establishment formalities for a sole trader
business are minimal, with least legal or administrative formalities
compared to the rest of the ownership structures. It often requires
less formality and less paperwork.
Operational Flexibility: A sole trader can easily change the way of
conducting business and strategies according to his or her whims
without adhering to the likes or rules set by any partner or
shareholder.
, Full Profits: The sole trader retains all the profits accruing from the
business; this is a direct financial reward for effort and success.
Confidentiality: A sole proprietor is not obligated to publish and
declare books of account or business details to the general public,
so privacy and confidentiality can be better retained.
Disadvantages of Sole Trader
Personal Risk: The business is solely dependent on the personal
capability and responsibility of the sole trader in incurring all
liabilities and debts. It follows that in case of failure or severe
liability, personal assets may be affected, such as a house and
savings.
Difficulty in raising capital: Raising capital is difficult as the sole
trader depends upon his personal savings, loans from friends,
relatives, and local banks, who prefer to have more options for
large funds.
Skill Constraints: This is because the business can fall behind in
diversified expertise, as all aspects of business rest on the sole
trader. This may also mean reduced growth and developments in
solving other business needs efficiently.
Operational Burden: The ownership of the business has to plunge
himself or herself into all business operations, which might include
administration, marketing, and customer service. Eventually, this
may mean a high workload and potential burnout.
