Advantages and disadvantages of Sole trader

 A sole trader business is one of the company business structures acceptable all over the world. It is considered to be the simplest and cheapest form of business structure that anyone can start. In most, sole trader Business Company is often done through the name of the trader or proprietor. In this case, Abraham being the proprietor, he would register this business under the Business Names Registration Act 2011 (Ctn) which is administered by the Australian Securities and Investments Commission (ASIC, 2013). Given that, Abraham wants to start up a small catering cum restaurant business he must consider going for a license to operate the food premises and permit from the environmental health authorities.

There are various advantages and disadvantages of running this type of business. Abraham needs to be aware of the advantages of sole trader business company which are as follows; First; Sole trader company does not have partners which means that the proprietor has to work alone and in legal terms you are a single entity, meaning the proprietor and the business are one. Abraham can actually name the business after his name like Abraham Catering Services. Therefore, Abraham will find it easier to start and run this business on his own.

Secondly; this type of business structure does not require any legal formation or an elaborated process for formation. Abraham will be making his own decisions and also control his own assets. Although, it is necessary it there is no legal requirement to register this type of business with the government. However, in the case of Abraham since it deals with the public consumption of food it is necessary for it to be registered for the purposes of Tax.

Thirdly; being a sole trader Abraham would is virtually self-employed and does not have to follow the obligation of going through the worker’s compensations or pay roll deductions.  This would also allow him to change his legal structures any time he wants when the business grows bigger or when he wants to dissolve it (Sweeney et al, 2007 & Gitman & McDaniel, 2009).

Sole trader also has several disadvantages which Abraham must bear in mind. This includes; first; Given that sole proprietorship company does exists as a legal entity, it would mean that the proprietor must face some tax implications. In the US for example, the proprietor’s tax bill would be lower because it’s combined with the owners but on the other hand the proprietor is expected to pay their own Medical care taxes and Social Security. Generally, the sole trader would the income tax at the rate of personal tax (William & Murray, 2008). Secondly, sole proprietorship does not have legal business protection against liabilities or debts in case the fails. In addition, if your business is sued in the court then it means that the proprietor must bear all the costs and at the same time would be liable to judgement. You could lose all your assets in case anything goes wrong (William & Murray, 2008).

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