GRADE 8
EMS
FORMS OF
OWNERSHIP:
SOLE TRADER
SOLE TRADER
- A SOLE TRADER IS AN
INDIVIDUAL WHO
OWNS A BUSINESS
SOLE TRADER: CHARACTERISTICS
Sole trader (characteristics)
Number of owners = 1
What owners are called = Owner
Amount of capita l= Contributes own capita OR can borrow from bank
Name requirements = No restriction to the name, e.g. Mily’s Store
Legal status = Not a separate legal entity
Liability for debt of the business = Unlimited liability. Creditors can take
the personal assets if the business is in debt.
Formation of the business = Very easy form, no registration required.
Division of profits = All the profits belong to the owner
Documentation = No documents required
SOLE TRADER: ADVANTAGES
Owner makes all decisions.
All profits belong to the owner.
Requires little capital to start.
Simple management structure.
The assets of the business belong to the owner.
Can easily adapt to the needs of the customer.
Owner works hard for business to be successful/
SOLE TRADER: DISADVANTAGES
Cash flow is often a problem.
Growth of business can be restricted due to lack of
capital.
Not a legal entity
No continuity MEANING if owner dies then business cannot
continue.
If the owner does not have enough knowledge or
experience the business may fail.
The owner is responsible for providing all the capital
needed.
GROUP ACTIVITY
FORM INTO GROUPS OF 4 AND DISCUSS THE FOLLOWING
CASE STUDY
Lily Bloom is a baker who started her own business called
Lily Bakes. She bakes cakes in a small shop in her area and
sells them to local customers. Lily handles every part of
the business on her own, including baking, taking orders,
and managing the business’s finances. Lily’s business has
been growing steadily over the past year.
DISCUSS THE FOLLOWING
1. What type of business is Lily’s Bakes?
2. What are the advantages of Lindy being a Sole
Trader?
3. What are the disadvantages of Lindy being a Sole
Trader?
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