A sole trader is a type of business structure. There is no legal framework, and the sole trader is the only owner of the business. He can employ people, however. He receives all profits from the business, as opposed to a plc or ltd where profits go to shareholders once costs have been made. A sole trader has unlimited liability.

A sole trader framework is useful for a business where someone wants to retain control of a relatively small business, such as in the case of a shopkeeper. It's very hard for sole traders to raise capital because they must use their own resources rather than selling shares. The main advantage of this structure is flexibility: the trader is free to change direction and diversify at will because he doesn't have shareholders to please. Due to his unlimited liability the risk in decisions are high.

No large operation could survive for long with a sole trader structure. What happens when the trader goes on vacation? A range of skills are needed to run a large business: the sole trader is unlikely to have all these skills, and is unlikely to be able to afford to employ people with these skills.

Sole Trader is also the name of a chain of shoe shops in England. (Thanks BlueDragon).

Sole trader.

A feme sole trader.


© Webster 1913.

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