profit based organisations.docx - Types of Profit-Based Organisations Nature of organisation Sole traders Meaning ● A sole trader is a type of

profit based organisations.docx - Types of Profit-Based...

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Types of Profit-Based Organisations. Nature of organisation Meaning Advantages Disadvantages Sole traders A sole trader is a type of business where the owner itself is the exclusive owner of said business and is entitled to keep all profits after tax has been paid but liable for all losses. A sole trader is the most common type of business practice. A sole trader could be an individual, or the owner could employ a few people to work for him. A sole trader starts off with very little capital, and this capital is usually obtained from personal savings and borrowing. Sole traders are obligated to follow less legal formalities when compared to the other types of profit-based organisations Since the sole trader is controlled by the owner itself, the owner gets to take any and all profit the business makes. This gives the owner an incentive to work harder. Sole traders have the luxury of being their own boss , thus having flexibility in the decision-making process Due to the smaller size of a sole trader, the service is more personalised . Larger firms usually do not have the time to A sole trader has unlimited liability . This means if the business is in debt, the owner’s personal items and property are attached to the repayment of the debt. Sole traders usually find it difficult to obtain finance from any source other than their own personal savings, thus causing limited sources of finance . Due to this, sole traders usually find it difficult to expand their business. Statistically, sole traders have a higher risk of failure when compared to other types of organisations. Competition from bigger firms poses a threat to the existence of sole traders.
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know each and every one of their customers personally. Unlike other types of businesses, sole traders do not need to show their financial records to the general public, thus letting them enjoy privacy .
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  • Fall '17
  • Business, Organisations, types of organisations, Profit Based Organisations

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