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Question
Define a sole trader.
Answer
A sole trader is a business owned and run by one person.
💡 Hint
1 owner, runs the business
Question
State one advantage of operating as a sole trader.
Answer
An advantage is complete control: the owner can make decisions quickly without consulting partners or shareholders.
💡 Hint
Control + fast decisions
Question
In BM exams, what is the difference between a feature and an advantage of a sole trader?
Answer
A feature describes what it IS (e.g. one owner, unlimited liability). An advantage describes what is GOOD about it (e.g. easy to set up, quick decisions).
💡 Hint
IS vs GOOD
Question
Name three key features of a sole trader.
Answer
Three key features are: one owner, unlimited liability, and no separate legal identity between owner and business.
💡 Hint
Pick 3: one owner, unlimited liability, no legal identity, no continuity
Question
What does unlimited liability mean for a sole trader?
Answer
Unlimited liability means the owner is personally responsible for all business debts, so personal assets can be used to pay creditors.
💡 Hint
Business debts can affect personal assets
Question
What is the biggest personal risk of being a sole trader?
Answer
The biggest personal risk is unlimited liability, where personal assets may be used to pay business debts.
💡 Hint
Unlimited liability
Question
State one disadvantage of operating as a sole trader.
Answer
A disadvantage is unlimited liability: the owner's personal assets may be used to pay business debts.
💡 Hint
Personal risk
Question
If a question says "State two features of a sole trader", give two correct feature points.
Answer
Two valid features are: one owner makes decisions; unlimited liability (owner personally responsible for debts).
💡 Hint
Use features, not advantages
Question
Why do BM exams often test "features" of sole traders?
Answer
Because features are objective and legal/structural, and many students mistakenly write advantages instead. Examiners want precise definitions like unlimited liability and one owner.
💡 Hint
Common trap: features vs advantages
Question
Give one example of how workload can be a disadvantage for a sole trader.
Answer
One person often does many roles (marketing, finance, operations), which can cause long hours and burnout, reducing effectiveness.
💡 Hint
One person = many roles
Question
Why is "easy to set up" NOT a feature of a sole trader in exams?
Answer
Because it is an advantage (a benefit). A feature must describe the legal/structural characteristics, such as one owner or unlimited liability.
💡 Hint
Examiners penalise mixing these up
Question
Explain what is meant by "no legal distinction" for a sole trader.
Answer
There is no separate legal identity: the owner and the business are treated as the same legal entity.
💡 Hint
Owner = business in law
Question
What is meant by "no legal continuity" for a sole trader?
Answer
The business has no legal continuity: it usually ends if the owner dies, retires, or becomes unable to operate it.
💡 Hint
Business may end if owner leaves
Question
Explain why a sole trader may find it hard to raise finance.
Answer
They cannot sell shares and lenders may view the business as higher risk because it depends on one person, limiting access to large funding.
💡 Hint
No shares + higher lender risk
Question
Give a quick real-life example showing unlimited liability.
Answer
A sole trader owes €20,000 after the business fails. If the business cannot pay, creditors can claim the owner's personal savings or assets to recover the debt.
💡 Hint
Debt can follow the owner personally
Question
Give a strong 2–3 sentence explanation of one disadvantage of a sole trader for a 4-mark style response.
Answer
Unlimited liability means the owner is personally responsible for business debts. If the business fails, creditors can claim the owner's personal assets, increasing personal financial risk and making the owner more cautious about expansion.
💡 Hint
Define + consequence
Question
What is the simplest one-line summary of a sole trader for revision?
Answer
One owner runs the business and keeps the profit, but carries all the risk because liability is unlimited.
💡 Hint
1 owner + keeps profit + unlimited risk
Question
What is a safe exam structure when asked to explain an advantage/disadvantage?
Answer
Use: (1) Identify the point, (2) Explain how it works, (3) State the impact on the business/owner.
💡 Hint
Point → how → impact
Question
Give one example of how privacy can be an advantage for a sole trader.
Answer
In many countries, sole traders have fewer requirements to publish detailed financial accounts, so competitors have less access to performance information.
💡 Hint
Fewer reporting requirements
Question
Give one example of a finance limitation of a sole trader.
Answer
A sole trader cannot sell shares, so they often rely on personal savings and bank loans, which can limit growth.
💡 Hint
No shares → limited finance
Read the notes
Full study notes for Sole traders
Topic 1.2 hub
Types of business entities
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BM exam skills
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