Sole Trader- The Challenges Faced

A sole trader is a business person who trades and manages his enterprise alone. By description, there is no legal distinction between the owner and the enterprise. All decisions are dependent on the owner, who will also take all the profits as well as absorb all the losses. The assets of the business are also in the owners name and his personal property can be sold off to clear any outstanding debts that accrue from the business.

The name of the business is not always the legal name of the sole trader. He may give his business a name that appeals to him. The name of the business should be used when opening a bank account for the enterprise. This type of business structure is recognized by law and there are rules and regulations that govern it.

This kind of business arrangement comes with its own share of advantages and disadvantages that a sole trader should be prepared to meet. On one of the advantages is that, the trader enjoys all the profits alone without sharing them out with anyone else. The business is also very easy to start, as it does not have to meet many legal requirements. Decisions are also made quickly because, there are not many consultations that need to be done.

Among the disadvantages is that, sometimes the sole trader may not have enough capital to start up the business, and this may spell limitations on the business. As earlier mentioned, the personal property of the trader may be sold off to cater for any debts that he is unable to pay. Another disadvantage is that, the sole trader is expected to manage and cater for all activities in the enterprise. He therefore lacks specialization and is likely to become worn out and hence performance may go down.

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