Compare and contrast sole trading and partnerships

Sole trading

They are easy to establish and there is usually no need for legal documents

The owner can take decisions independently and has full control over enterprise

Any profit made will be kept by owner

Sole traders provide more personal service

There is greater flexibility in hours of work

Sole traders may receive government support

Sole trading

There is unlimited liability which means the owner is totally responsible for any debts the enterprise has and may be forced to sell his own possessions to pay them off

There may be difficulty in raising enough finance as sole traders are most likely to be bankrupt so people are less likely to lend money to them

The owner may lack skills or experience needed

It may be difficult to compete with larger firms

A sole trader enterprise is an unincorporated buisness the owner can be taken into court if there is a dispute

Partnerships

Partnerships are easy to form. They usually require a legal contract signed by all partners. It is called the deed of partnership

Having more than 1 owner makes it easier to raise money

Partners can share decision making

Partners can specialize in particular aspects of work

A partner may be able to negotiate discounts from suppliers

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Partnership

Ordinary partners have unlimited liability. They may be asked to sell their possessions if the enterprise is in debt

A partnership might not be enough to gain economies of scale

Disagreement between partners can make decision making hard

Any decision made by one partner is legally binding to all partners

If any partner leaves or dies the partnership is dissolved

The profits are shared between the partners

The partners can be sued by customers