Final answer:
A sole trader is an individual who owns and operates a business alone, bearing all of its responsibilities and entitled to all of its profits, with the main advantage of full control and simplicity, and the disadvantage of personal liability and potential difficulty in raising funds.
Step-by-step explanation:
A sole trader is a business structure whereby a single individual owns, operates, and bears all the responsibility for the business. Unlike corporations, the business is not a separate legal entity, which means that the owner is personally liable for debts and legal actions taken against the business. This form of business is easy to start and manage because it typically requires less paperwork and fewer regulatory obligations.
Advantages of a Sole Trader
- Simple to establish and operate
- Owner retains full control and all profits
- No special business taxes, profits are taxed as the owner's personal income
Disadvantages of a Sole Trader
- Difficult to raise funds for expansion
- Unlimited personal liability
- Business continuity may be affected by the owner's decision to cease operations or unforeseen events