Between sole trader and partnership
There are some differences between sole trader and partnership. One of the difference is sole trader is a business that run by a person only whereas partnership is a business has to be run by two or more people. The second difference is sole trader can made the decision himself without asking and discussing, but partnership needs to discuss when they make a decision and get ideas from others. The last difference is sole trader can get all of the profit whereas partnership must share out the profit predesigned proportion. There are also have some similarity, first of all, sole trader and partnership were unlimited liability, that means they were responsible for all the debts of the business, when those debt cannot be met by itself, then they need to sell their own private assets. Furthermore, they were operating in the private sector of a business. The last similarity is they were actually have a same goal and objectives such as make more profit, survival, increase market share.
In addition, there are some differences between sole trader and private company too. One of the difference is sole trader is unlimited liability whereas private company is limited liability that means the greatest amount investors can lose is the value of their shares and they do not lose any personal assets. Besides that, sole trader is responsible for the entire business andfor all the affairs pertaining to the business whereas for the private company no single person owns the company, it has a perpetual existence and not affect by the death of any share holder or director. The third difference is sole trader get all the profit but the profits earned by the company must be distributed among share holders as dividend. There is no similarity between sole trader and private company.
I would like to advise Lydia changes to partnership business, even though sole trader is the simplest form of business, Lydia should consider about sole trader provides all the capital and undertakes all the risks, the owner retains all the profits and she will be personally liable for all debts incurred. As sole trader is a small business, sources of finance may be more difficult to obtain compared to larger businesses. One consequence of this is that expansion can be difficult. Other than that, sole trader can be difficult to raise finance, because they are small, banks will not lend them large sums and they will not able to use any other form of long-term finance unless they change their ownership status. Sole trader can be difficult to enjoy economies of scale, for instance, lower costs per unit due to higher levels of production, so if Lydia chooses to run a sole trader business, she might not be able to buy in bulk and enjoy the same discounts as a larger business. On the other hand, as far as legal matters go, a partnership in the business sense is the relationship that subsists between persons carrying on business in common with a view to profit. Besides that, the financial resources of more than one person are likely to be better than in a sole trader and responsibility can be shared, thus allowing time off. In general partnership the liability of each partner is not limited to the business. Hence partnership enjoys better credit standing in the eyes of creditors as compare to sole trader ship due to large number of owners. In sole trader ship single person is responsible to manage all the affairs of the business. Hence it is difficult for the sole trader to manage individually all the affairs of the business. In partnership the work for Lydia is divided among the partners according to their interest and experience. Therefore the partners may perform their duties for which they are suitable. It will ensure efficiency and high profits. The partnership can also be legally dissolved without much difficult by mutual consent of the partners or in accordance with a contract by the partners. In conclusion, that is all the reason i think Lydia should change sole trader to partnership business.
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