The Advantages and Disadvantages of Sole traders and Partnerships

Jaiden Butch
Mind Map by Jaiden Butch, updated more than 1 year ago
Jaiden Butch
Created by Jaiden Butch about 5 years ago
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This is revision for Year 10 business study's Disadvantages and Advantages of being a Sole Trader or being in a Partnership.

Resource summary

The Advantages and Disadvantages of Sole traders and Partnerships
  1. Sole Traders
    1. Advantages
      1. You make your own decisions and don't have other people you need to go to to run the business the way you want, this means that you have a business that you enjoy and made 100% you.
        1. There would be no people that you didn't like to work with if that was another owner of if that was a employee none of that would happen if you were a sole trader.
          1. Decision making would be quick and effective and could make the business run more effectively and efficiently.
          2. Disadvantages
            1. You would have unlimited liability this means you would be taking a massive risk and might lose everything you own if your business went into debt.
              1. If you were the only owner it would be difficult to get time off and means you would have to work all the time. This would make things stressfull and you might not be able to handle it. You could get someone to run the business why you were away, however this would not be official and would be hard to do.
                1. Another thing would be if there was a bad decision that was made there would be no one to fall back on you would be the one to blame and it might affect your personal relationship.
              2. Partnerships
                1. Advantages
                  1. You would have someone to fall back on this would mean you could look to the other owner and seek their advice and this might make things more effective.
                    1. Your partners would most likely be people you trusted and this, hopefully, would mean that you could trust them with your ideas and if you needed to leave or have a holiday you could trust them to keep the business up and running.
                      1. If something went wrong you could fall back on them, it would make them better to handle and you wouldn't have much recoil per say.
                        1. Another thing would be that you would have more starting capitol then a sole trader as you would have multiple starting incomes and this would mean you could get better, contracts, equipment, certificates etc.
                        2. Disadvantages
                          1. The disadvantages of being in a partnership is that if you don't like one of the partners then it could affect the business quite a lot and this could reduce profit, increase debt and other damaging the business.
                            1. If you have a lot of partners then your ideas might be 'swept under the carpet' or not considered as much as you would like them to be.
                              1. Decision making could be slow and you would have to consult all the partners before the decision will actually go through, this could be difficult if one of the partners lived far away or could not be available all the time. This would affect the business and it's employees.
                                1. Finally the cost to run a partnership would be more then a sole trader and might make things difficult or ineffective.
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