Sole trader
Sole trader — a business owned and operated by one person.
| Advantages | Disadvantages |
|---|
| Profits are not shared. | Difficult to raise capital. |
| Easy to establish and manage. | The owner bears all the responsibility. |
| Decision-making is fast. | Unlimited liability. |
Why prepare financial statements?
- They help with decision-making.
- They allow the business to compare its performance with previous years.
Trading vs service businesses
| Trading business | Service business |
|---|
| Sells tangible goods. | Sells intangible services. |
| E.g. a grocery store or furniture store. | E.g. cleaning or event planning. |