Financial Report for Sole Traders and Partnerships Essay

Sole tradersAccording to Peterson and Plowman As repair proprietorship is a condescension unit whose ownership and management argon vested in one person. This somebody assumes all risk of loss and failure of the enterprise and receives all profits from its successful operation. A sole trader describes any vexation that is owned and controlled by one person, although they whitethorn employ workers, e.g. a newsagents shop. Individuals who provide a specialist service like hairdressers, plumbers or photographers, are too sole traders. Sole traders do not have a separate legal existence from their owner. As a result, the owners are personally liable for the firms debts, and may have to pay them step forward of their own pocket. This is called infinite liability. Advantages* The firms are usually small, and easy to set up.* Generally, only a small mensuration of capital needs to be invested, which reduces the initial start-up cost. * The wage bill will usually be low, because i n that location a few or no employees. * It is easier to keep overall control, because the owner has a hands-on burn up to running the business and can make decisions without consulting anyone else.Dis favors* The sole trader has no one to share the office of running the business with. A good hairdresser, for example, may not be very good at handling the accounts. * Sole traders often work long hours and find it difficult to take holidays, or term off if they are ill. * Developing the business is also limited by the amount of capital personally available. * There is also the risk of unlimited liability, where the sole trader can be forced to change personal assets to cover any business debts.PartnershipsPartnerships are businesses owned by two or more(prenominal) people. A contract called a deed of confederation is normally drawn up. This states the type of partnership it is, how a lot capital each party has contributed, and how profits and losses will be shared. Doctors, den tists and solicitors are typical examples of professionals who may go into partnership together. They can benefit from shared expertise, but like the sole trader, have unlimited liability. A partnership can also have a sleeping partner who invests in the business but does not have dealings in the day to day running of the enterprise. Advantages* The main advantage of a partnership over a sole trader is shared responsibility. This allows for specialisation, where one partners strengths can complement anothers. For example, if a hairdresser were in partnership with someone with a business background, one could concentrate on providing the salon service, and the other on handling the finances. * More people are also contributing capital, which allows for more flexibility in running the business. * There is less time jam on individual partners.* There is someone to consult over business decisionsDisadvantages* The main disadvantage of a partnership comes from shared responsibility. * D isputes can arise over decisions that have to be made, or about the stew one partner is putting into the firm compared with another. * The distribution of profits can cause problems. The deed of partnership sets out who should get what, but if one partner feels another is not doing enough, there can be dissatisfaction. * A partnership, like a sole trader, has unlimited liability.Source taken from http//www.bbc.co.uk