Understanding Business Organisations: Advantages and Disadvantages of Sole Trader and Partnership

Understanding
Business
Organisations

Contents
INTRODUCTION...........................................................................................................................3
TASK...............................................................................................................................................3
Sole trader....................................................................................................................................3
Partnership...................................................................................................................................4
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Business organisation may be defined as a commercial entity which is engaged in various types
of activities such as professional, industrial and commercial in order to earn profit (Jansen,
Steenbakkers and Jägers, 2017). Profit maximisation is the main purpose of any business
organisation. It is concerned with managing the resources in such a manner that yield higher
profit. It is established on the basis of rules and regulations formulated by government. This
project essay will cover advantages and disadvantages of various types of business organisation
such as sole trader, proprietor and partnership. In addition to that, it will also cover tall and flat
structure of company along with different functions of business. At last, it will cover a brief
discussion of organisational culture and how positive culture can impact business organisation.
TASK
Sole trader
This type of business is also known as sole proprietorship and is run and manage by a single
person. He is entitled to take the whole profit of business. Following are advantages and
disadvantages of sole trader.
 Fewer Fixed overheads – the cost of commencing sole trader business is minimal and
incurs less cost as compared to company and other types of business.
 Complete control -The sole trader is having all the control o0ver business and can take all
the decision which will help him in generating more profit.
 Financially rewarding – The profit is not distributed as there is only a single owner and
he is entitled to have all profits (Rye 2020).
Disadvantages
 Unlimited liability –The sole trader is having unlimited liability that means that he is
liable and responsible for any outstanding expenses such as tax and rent payment.
 Sole responsibility – The sole trader is responsible for all the actions and responsible
for their decision. if the decision taken by him do not bring profit then he is the
person liable for same.
 Barriers to finance – In case of sole trader, it becomes difficult for them to opt
credibility and finance because of its unlimited liability.

Contents
INTRODUCTION.....................................................................................................................................3
TASK 1.......................................................................................................................................................3
Advantages and Disadvantages of Sole Proprietorship, Partnership as well as Limited Liability............3