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Questions and Answers
There are three legal regulations which must be followed, what are they?
There are three legal regulations which must be followed, what are they?
- In some industries, the sole trader must observe laws, these include health and safety laws and obtaining a licence to sell alcohol or operate a taxi. (correct)
- The owner must register with, and send annual accounts to, the Government Tax Office. (correct)
- The name of the business is significant. The name must be registered with the Registrar of Business Names. (correct)
What are three advantages and disadvantages to sole trades of running their own business?
What are three advantages and disadvantages to sole trades of running their own business?
Advantages:
- There are few legal regulations when setting up the business.
- You are your own boss. Having complete control over your business.
- They have the freedom to choose their own holiday's, hour of work prices to be charged and whom to employ
- They have close contact with their customers, the personal satisfaction of knowing their regular customers and the ability to respond quickly to their needs and demands.
- Incentive to work hard as they are able to keep all of the profits after paying tax.
- They do not have to information about their business to anyone else – other than the Tax Office.
Disadvantages:
- They have no one to discuss business matters with as they are the sole owner.
- They are fully responsible for any debts that the business may have. They have unlimited liability which means if they cannot pay its debts, then the people they owe money to (creditors) can force them to sell all of their own possessions in order to pay them.
- If they wish to expand the business, they do not have enough money to do this. The sources of finance for a sole trader are limited to the own's saving, profits made by the business and small bank loans. Banks are often reluctant to lend large amounts to sole trades.
- If the sole trader is ill there will be no-one who will take control of the business. Sole trades cannot pass on the business to family members because when they die the business will legally not exist any longer. This is because there is no continuity of the business after the death of the (15) owner.
Mike offered his friend Dave the chance to become a partner in his Taxi business. They prepared a written partnership agreement. What five main points would be important to include in the agreement which would benefit both parties.
Mike offered his friend Dave the chance to become a partner in his Taxi business. They prepared a written partnership agreement. What five main points would be important to include in the agreement which would benefit both parties.
- The amount of capital invested in the business by each partner.
- The tasks to be undertaken by each partner.
- The way in which the profits would be shared.
- How long the partnership will last.
- Arrangements for absence, retirement and how new partners could be admitted.
Name three types of advantages that have become clear to Mike that it had several advantages and disadvantages over being a sole trader.
Name three types of advantages that have become clear to Mike that it had several advantages and disadvantages over being a sole trader.
Name three types of disadvantages that have Dave worried.
Name three types of disadvantages that have Dave worried.
Mike and Dave discuss these points with their solicitor. They agree partnerships were very suitable in certain situations as sole traders, but they both are clear that they want to expand the business further but wanted to reduce personal risk. They would like to protect their own possessions from business creditors in event of failure. The solicitor advised them to consider forming a private limited company. She explains. She explained that this type of business organisation would be very different from a partnership and would have its own benefits and drawbacks. Mike and Dave asked the solicitor to list three benefits of forming a private limited company.
Mike and Dave discuss these points with their solicitor. They agree partnerships were very suitable in certain situations as sole traders, but they both are clear that they want to expand the business further but wanted to reduce personal risk. They would like to protect their own possessions from business creditors in event of failure. The solicitor advised them to consider forming a private limited company. She explains. She explained that this type of business organisation would be very different from a partnership and would have its own benefits and drawbacks. Mike and Dave asked the solicitor to list three benefits of forming a private limited company.
The legal adviser and solicitor were keen for Mike and Dave to know exactly what they would be committed to if they formed a private limited company, so they also listed three disadvantages.
The legal adviser and solicitor were keen for Mike and Dave to know exactly what they would be committed to if they formed a private limited company, so they also listed three disadvantages.
Define 'laissez-faire leadership style'
Define 'laissez-faire leadership style'
Where does ‘laissez-faire' come from and what does it mean?
Where does ‘laissez-faire' come from and what does it mean?
Identify two roles of a manager.
Identify two roles of a manager.
Outline one external cost and one external benefit Millie's business activities might create.
Outline one external cost and one external benefit Millie's business activities might create.
Explain two methods of IT based communication Millie might use with its employees.
Explain two methods of IT based communication Millie might use with its employees.
Explain three ways a pressure group might try to influence business decisions. Which way do you think is likely to be most effective? Justify your answer.
Explain three ways a pressure group might try to influence business decisions. Which way do you think is likely to be most effective? Justify your answer.
Flashcards
What is a sole trader?
What is a sole trader?
A business owned and operated by one person.
What is one legal regulation for sole traders?
What is one legal regulation for sole traders?
The owner must register with the Government Tax Office and send annual accounts.
What is another legal regulation for sole traders?
What is another legal regulation for sole traders?
The business name must be registered with the Registrar of Business Names.
What is a third legal regulation for sole traders?
What is a third legal regulation for sole traders?
Sole traders must follow industry-specific laws like health and safety regulations or obtaining licenses.
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What's a key advantage of being a sole trader?
What's a key advantage of being a sole trader?
The business owner has complete control and makes all decisions.
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What's another advantage of being a sole trader?
What's another advantage of being a sole trader?
Sole traders have flexibility to choose their own working hours, holidays, and prices.
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What's a third advantage of being a sole trader?
What's a third advantage of being a sole trader?
Sole traders have direct contact with customers and can quickly respond to their needs.
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What's a fourth advantage of being a sole trader?
What's a fourth advantage of being a sole trader?
Sole traders get to keep all profits after paying taxes, providing strong motivation.
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What's a fifth advantage of being a sole trader?
What's a fifth advantage of being a sole trader?
Sole traders don't need to share business information with anyone except the Tax Office.
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What's a disadvantage of being a sole trader?
What's a disadvantage of being a sole trader?
Sole traders lack someone to discuss business matters with, leading to isolation.
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What's another disadvantage of being a sole trader?
What's another disadvantage of being a sole trader?
Sole traders bear full responsibility for business debts, risking their personal assets.
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What's a third disadvantage of being a sole trader?
What's a third disadvantage of being a sole trader?
Sole traders often struggle to expand due to limited funding options and reluctance from banks.
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What's a fourth disadvantage of being a sole trader?
What's a fourth disadvantage of being a sole trader?
If a sole trader is ill, no one is available to take over the business, leading to disruption.
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What is a partnership?
What is a partnership?
A partnership is a business owned and run by at least two people.
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What is a key point to include a partnership agreement?
What is a key point to include a partnership agreement?
The partnership agreement outlines the amount of capital each partner invests.
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What is another key point to include in a partnership agreement?
What is another key point to include in a partnership agreement?
The agreement specifies the tasks and responsibilities of each partner.
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What is a third key point to include in a partnership agreement?
What is a third key point to include in a partnership agreement?
The agreement details how profits will be shared between the partners.
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What is a fourth key point to include in a partnership agreement?
What is a fourth key point to include in a partnership agreement?
The agreement sets the duration of the partnership.
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What is a fifth key point to include in a partnership agreement?
What is a fifth key point to include in a partnership agreement?
The agreement outlines procedures for partner absence, retirement, and new partner admissions.
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What is a primary advantage of a partnership?
What is a primary advantage of a partnership?
Partners can pool their savings to invest more capital in the business.
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What is another advantage of a partnership?
What is another advantage of a partnership?
Responsibilities are shared, allowing partners to specialize in their areas of expertise.
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What is a third advantage of a partnership?
What is a third advantage of a partnership?
Partners are motivated to work hard because they share in the profits and losses.
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What is a disadvantage of a partnership?
What is a disadvantage of a partnership?
Partnerships lack limited liability, meaning creditors can claim personal assets if the business fails.
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What is another disadvantage of a partnership?
What is another disadvantage of a partnership?
Partnerships lack a separate legal identity, so the business ends if a partner dies.
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What is a third disadvantage of a partnership?
What is a third disadvantage of a partnership?
Disagreements between partners can arise, leading to delays and inefficiencies in decision-making.
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What is a fourth disadvantage of a partnership?
What is a fourth disadvantage of a partnership?
One inefficient or dishonest partner can negatively impact the entire partnership.
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What is a private limited company?
What is a private limited company?
A private limited company is a business structure with limited liability, offering protection from creditors.
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What is a benefit of forming a private limited company?
What is a benefit of forming a private limited company?
Shares can be sold to a large number of people, raising significant capital for growth.
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What is another benefit of forming a private limited company?
What is another benefit of forming a private limited company?
Shareholders have limited liability, meaning they are responsible for their initial investment only.
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What is a third benefit of forming a private limited company?
What is a third benefit of forming a private limited company?
Founders can retain control over the company as long as they maintain a majority shareholding.
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What is a disadvantage of forming a private limited company?
What is a disadvantage of forming a private limited company?
Forming a private limited company involves legal procedures such as registering the company and preparing documents.
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What is another disadvantage of forming a private limited company?
What is another disadvantage of forming a private limited company?
The company's accounts are less private than those of sole traders or partnerships, as they must be made available to the public.
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What is the laissez-faire leadership style?
What is the laissez-faire leadership style?
A leadership style where managers give employees significant autonomy and minimal supervision.
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Where does the term "laissez-faire" originate, and what does it mean?
Where does the term "laissez-faire" originate, and what does it mean?
It is a French phrase meaning "allow to do", reflecting the manager's approach of non-interference.
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What is one role of a manager?
What is one role of a manager?
A manager assigns tasks to employees and empowers them to make decisions.
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What is another role of a manager?
What is another role of a manager?
A manager provides support, guidance, and training to their team when needed.
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Define external cost.
Define external cost.
A negative impact on the environment and communities caused by a business's activities.
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Define external benefit.
Define external benefit.
A positive benefit that a business's activities create for society as a whole.
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Explain one IT-based communication method.
Explain one IT-based communication method.
Two-way radios allow instant communication between workers, improving coordination and safety.
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Explain another IT-based communication method.
Explain another IT-based communication method.
Satellite communication enables reliable data transmission over long distances and to remote locations.
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Exam Instructions
- Insert details (date, class year, nickname) in provided spaces.
- Use black or dark blue ballpoint pen. HB pencils permitted for notes, diagrams, or graphs only.
- Do not use erasable pens or correction fluid.
- Neatly cross out mistakes.
- Rubber/eraser allowed for pencil removal.
- Highlighters permitted on the question paper.
- Dictionaries not allowed.
Sole Trader Business
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A sole trader is a business owned and operated by one person.
-
Legal regulations:
- Register with the Government Tax Office and submit annual accounts.
- Register business name with the Registrar of Business Names.
- Comply with industry-specific regulations (health & safety, licensing for alcohol/taxi).
-
Advantages:
- Few legal regulations for setting up.
- Control over business decisions.
- Freedom in choosing holiday schedule, working hours, and employee compensation.
- Close customer relationships and quick responses to customer needs.
- Profits kept after tax payment.
- No external business information is required (except Tax office).
-
Disadvantages:
- Sole responsibility for all business debts (unlimited liability).
- No one to discuss business matters with.
- Limited financial resources/difficulty raising capital.
- Inability to expand quickly (not enough capital)
- Business operation ceases upon the owner's death or incapacitation.
Partnership Business
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Business owned and run by two or more people.
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Key points of a partnership agreement:
- Capital investment by each partner.
- Tasks assigned to each partner.
- Profit-sharing arrangement.
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Advantages:
- Increased capital investment from multiple partners.
- Shared responsibilities for business tasks and operation.
- Profit sharing amongst partners.
- Increased motivation in working to benefit from better profits.
-
Disadvantages:
- Partners bear unlimited liability for business debts, putting personal assets at risk.
- Potential disagreements and conflicts between partners.
- Difficulty in making business decisions as several opinions must be considered
- Not a separate legal entity (business ceases upon one partner's departure/death)
Private Limited Company
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Advantages:
- Shares can be sold to raise capital.
- Limited liability (only own capital at risk, not personal assets).
- Continuity of business (not affected by one owner's departure/death).
- Relatively easier expansion due to capital inflow.
-
Disadvantages:
- Strict legal procedures involved in company formation.
- Legal documents (Memorandum & Articles of Association) must be created and submitted.
- Greater public scrutiny (account details are not confidential).
Leadership Style: Laissez-faire
- Hands-off approach to management.
- Employees have high autonomy.
- Intervention only required for issues or requests from employees.
Manager Roles
- Delegate tasks to employees, allowing them to be primary decision makers.
- Provide support, guidance, consultation, and training when needed.
- Trust employees to handle details and execute tasks effectively and competently.
External Costs & Benefits
- Cost: Negative environmental impacts.
- Benefit: Positive externalities.
IT Communication Methods
- Method 1: Two-way radios for real-time communication.
- Method 2: Satellite communication for remote locations.
Pressure Groups
- Influence business decisions through ethical behavior changes.
- Media campaigns to create negative publicity.
- Boycotts to discourage customer purchase.
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