Sole traders and partnerships Cambridge IGCSE Business Studies (9–1) revision
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In plain words
The simplest business is one person working for themselves: a sole trader. If two or more people run it together and share the profits, it is a partnership.
In both, the law sees no difference between the business and the people who own it. That has one big consequence: unlimited liability.
6 things to know
- A sole trader is a business owned and controlled by one person. It is easy and cheap to set up, the owner makes all the decisions and keeps all the profit.
- Its drawbacks: unlimited liability, limited finance, long hours with nobody to share the work, and the business ends if the owner stops.
- A partnership is owned by two or more people. It brings more capital, shared work, and partners with different skills.
- Its drawbacks: partners usually have unlimited liability, profits are shared, partners may disagree, and each is bound by decisions the others make.
- Unlimited liability means the owners are personally responsible for all the debts of the business, and could lose their own possessions, such as their home.
- Both are unincorporated: the business has no legal identity separate from its owners.
Tips and tricks
- Unlimited liability is the point to explain in full: the owner's personal belongings can be taken to pay the debts of the business.
- "Sole" means one owner, not one worker. A sole trader can employ staff.
It lands in your notebook with its questions as flashcards.
Sole traders and partnerships: 5 questions and answers
These are the quiz’s questions. Do the quiz first, then come back here for the ones that got you.
Which is a feature of a sole trader?
One owner takes all the risk and all the reward.
What does unlimited liability mean for a sole trader?
The owner and the business are the same in law.
Which is an advantage of a partnership over a sole trader?
Each partner can contribute money.
Which is a disadvantage of a partnership?
What is earned must be divided between the partners.
Which type of business is unincorporated?
The partners and the business are not separate in law.
Quiz
5 questions
Tap an answer and you’ll see straight away whether it’s right, and why.
Worksheet
3 questions, 8 marks. Write your answers on paper, then check them.
Sole traders and partnerships
Cambridge IGCSE Business Studies (9–1) 0986 · 8 marks · papermunch.org
Name ______________________________ Date ______________
Define a sole trader.[2]
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A business that is owned and controlled by one person.
Explain what is meant by unlimited liability.[3]
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The owners are personally responsible for all the debts of the business. If the business cannot pay, they may have to sell their own possessions to do so.
Explain two advantages of forming a partnership compared with being a sole trader.[3]
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More owners can put in more capital, so the business can be larger. The partners can share the workload and bring different skills, such as one handling sales and another the accounts.
Answers: Sole traders and partnerships
- 1. A business that is owned and controlled by one person.
- 2. The owners are personally responsible for all the debts of the business. If the business cannot pay, they may have to sell their own possessions to do so.
- 3. More owners can put in more capital, so the business can be larger. The partners can share the workload and bring different skills, such as one handling sales and another the accounts.