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When
setting out in business, you will probably be setting up on your
own, using your own personal capital to get started. If this
is the case you will be known as a Sole Trader. The sole
trader is the most simplest business to develop as it
initially consists of only you (the one man band), and has very little legal
formalities, obligations or constraints attached to this form
ownership as opposed to other forms; in fact it is just a case of
informing the tax inspector and contributions agency of your
intentions and you can begin to trade. You also need only a small
amount of capital and you're off!
Remaining
as a sole trader has many advantages, mainly being that you are
able to give a more personal service to your customers and you are
able to make changes within your business very quickly due to
there is little or no bureaucracy there being only one person to
make the final decision; so remember this fact and exploit it.
Other advantages include having complete control over the
business and its profits; you are able to use any money the
business brings as you deem fit without having to justify your
spending.
However,
as the expansion of the business depends on the amount of capital you
are personally able to inject, you may find investing in the
growth of my business very difficult as capital is often difficult
to find. In addition,
as a result of the inability to assist expansion, your competitors
would have the edge over your business; for example, businesses
with greater access to investment would be able to adapt more
quickly to market demands leaving you struggling to compete.
Larger organisations could change the prices without
feeling the impact as much as the sole trader would.
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The
key to success is to exploit the advantages of being a sole trader
and take seriously the disadvantages. |
Multi-nationals would
be able to cope with demand and supply more readily and far more quickly
that a small sole trader, as greater investment would allow them to buy
equipment, increase production, adopt new technology and develop new
ideas. The pressure put upon
the sole trader must not be ignored, and if you are thinking of becoming
self employed as a sole trader you must address this issue as it could
ultimately threaten the survival of your business.
Apart
from the pressures placed on the sole trader by the larger organisations,
you are also fully liable financially, and the need for your business to
examine the implications and consequences of bankruptcy or loss of
personal possessions due to the sole trader accepting unlimited liability
must also be considered. The larger
you business becomes, the great risk will be.
If
you are considering setting out in business as a sole trader, then you
need to take all these consideration on board. The key to success is
to exploit the advantages of being a sole trader and take seriously the
disadvantages. Secondarily, you will also need to plan well for the
future deciding how you business might develop - would you consider a
partnership arrangement or become a limited company? What would be the
advantages? |
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