Explain what is meant by a sole trader by using the following case. Mateo runs a bicycle-delivery business in a city. He owns the equipment, keeps all remai...
Question 1 Report
Explain what is meant by a sole trader by using the following case. Mateo runs a bicycle-delivery business in a city. He owns the equipment, keeps all remaining profit after costs and makes the main decisions. He has hired two riders, but has not formed a company with them.
(a) What type of business ownership does Mateo have? [1]
(b) Identify one decision Mateo is likely to make as the owner. [1]
(c) Explain one advantage of being a sole trader for Mateo. [2]
(d) Which financial risk may Mateo face if the business cannot pay its debts? [1]
Answer Details
(a) Mateo is a sole trader (or sole proprietor). He owns the business himself, even though he employs riders. [1]
(b) One decision he may make is setting delivery prices. Other valid examples include choosing delivery areas, buying equipment or employing riders. A sole trader makes the main business decisions. [1]
(c) An advantage is that Mateo has direct control over decisions. He can, for example, change prices or delivery areas quickly without needing agreement from partners or shareholders. [2]
(d) Mateo has unlimited liability. If the business cannot pay its debts, his personal assets may be used to repay them. [1]
Exam reminder: Employing workers does not stop a person being a sole trader. The key point is that one person owns and controls the business.
Download The App On Google Playstore
Everything you need to excel in your exams
