Business Ownership: Sole Traders and Partnerships (Cambridge International AS Business)
Exam board Cambridge International · ASUpdated 2025-06-09
Sole traders
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When an entrepreneur starts a business, they will often start operating as a sole trader
- This is a business with a single owner (although they may still hire employees)
Examples of sole trader businesses
| Example | Description |
|---|---|
| Nico’s Auto-Cleaning | - 19-year-old Nico runs a car cleaning service using eco-friendly products |
| Jan’s Bike Repairs | - Ben is a mobile cycle mechanic covering suburban Stockholm |
| Taste of Kerala | - Larissa is a street-food vendor at weekend markets and music festivals |
| PixelPup Design | - Mohan is a freelance graphic-designer serving small charities online |
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Sole traders often run their business alone and so need to have a varied skillset, including:
- Money skills: set sensible prices, keep basic records and monitor cash coming in and going out so the business doesn’t run out of money
- Great customer service: be friendly, reliable and helpful so people come back and tell their friends
- Simple marketing and selling: spread the word on social media or in the local area and feel confident asking for the sale
- Problem-solving and resilience: stay calm when things go wrong (like late payments or lost stock) and find quick fixes
Evaluating a sole trader setup
| Advantages | Disadvantages |
|---|---|
| - Easy and inexpensive to set up - The owner has complete control over the business - All profits belong to the owner - Simple tax arrangements - Decisions can be made very quickly so the business can react swiftly to market change - High levels of personal satisfaction | - Unlimited liability, meaning the owner is personally responsible for any debts the business incurs - Limited access to finance and capital - Limited skill sets - Difficult to take time off from the business |
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Over time, sole traders may change the form of business
- By forming a partnership or becoming a private limited company with limited liability they can access more funding or provide more security for the owners
Partnerships
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A partnership involves two or more people joining together to own a business
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They are relatively easy to set up with relatively few legal formalities
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Partners may choose to draw up a deed of partnership which states the formal rights of each partner including
- The amount of capital contributed by each partner
- How profits or losses are shared amongst partners
- The procedures for dissolving the partnership and taking on new partners
- The level of control each partner has
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Examples of business that commonly operate as partnerships include lawyers, accountants and doctors
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Evaluating a partnership setup
| Advantages | Disadvantages |
|---|---|
| - Easy and inexpensive to set up and run, as there are few legal formalities - Shared responsibilities and decision-making - More skills and knowledge means partners can specialise in their area of expertise - Increased access to finance and capital | - Partners also have unlimited liability for debts incurred by the business - In some countries it is possible to set up as a limited liability partnership, which removes this risk - Partners' decisions are legally binding on all owners - There is potential for disputes between partners - Profits are often shared equally regardless of a partner's contribution |
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