Sole Traders Business Structure Quiz

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What are the three legal regulations which must be followed by a sole trader?

The owner must register with, and send annual accounts to, the Government Tax Office. The name of the business is significant. The name must be registered with the Registrar of Business Names. 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.

What are three advantages of a sole trader running their own business?

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 holidays, hours of work, prices to be charged, and who to employ.

What five main points are important to include in a partnership agreement?

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.

What three advantages are there to a partnership over being a sole trader?

More Capital could now be invested into the business with the partner's saving as well as his own. The responsibilities of running the business were now shared. Both partners were motivated to work hard because they would both benefit from the profits. Signup and view all the answers

What three disadvantages are there to a partnership?

The partners do not have limited liability. If the business failed, then creditors could still force the partners to sell their own property to pay business debts. The business does not have a separate legal identity. If one of the partners died, then the partnership would end. Partners can disagree on business decisions and consulting all partners takes time. If one of the partners is very inefficient or actually dishonest, then the other partner could suffer by losing money in the business. Signup and view all the answers

What are three benefits of forming a private limited company?

Shares can be sold to a large number of people. The sale of shares could lead to much larger sums of capital to invest in the business than the two original partners could manage to raise themselves. All shareholders have limited liability. The people who start the company – Mike and Dave in our example – are able to keep control of it as long as they do not sell too many shares to other people. Signup and view all the answers

What are three disadvantages of forming a private limited company?

There are significant legal matters which have to be dealt with before a company can be formed. Both of these documents are intended to make sure that companies are correctly run and to reassure shareholders about the purpose and structure of the company. The accounts of a company are less secret than for either a sole trader or a partnership. Signup and view all the answers

What are two roles of a manager?

Delegation that allows employees to be primary decision makers. They give their team support, guidance, consultation, and training when it's needed, but trust them to handle the details and execution of their tasks and projects. Signup and view all the answers

What is one external cost and one external benefit that Millie's business activities might create?

The production of oil can have negative impacts on the environment and local communities such as, environmental damage, oil spills, health risks, injuries and illness. Education is an example of a positive externality. Where those who invest in it gain knowledge and production for society as a whole. Signup and view all the answers

What are two methods of IT based communication that Millie might use with its employees?

Using two-way radios (wireless intercoms) for real – time communication. These radios allow for real – time, two – way communication between workers, providing immediate feedback and coordination of tasks. Ultimately this can enhance safety and productivity. Satellite Communication for working off shore. A reliable option that can transmit data over long distances and to remove locations. It is fast and can move large amounts of voice, fax, and data. However, it can be expensive and vulnerable in bad weather. Signup and view all the answers

How might a pressure group try to influence business decisions? (Select all that apply)

Try to influence businesses to behave more ethically. Signup and view all the answers

What does laissez-faire mean?

Laissez-faire is French and it means "allow to do". Signup and view all the answers

What is a laissez-faire leadership style?

A leader who adopts a hands-off approach to management, allowing employees a high level of autonomy and minimal supervision. Intervention only by request or when there is a problem. Signup and view all the answers

Study Notes

Exam Instructions

Ensure details like date, class year, and nickname are accurately filled in the top of the answer sheet.
Use a black or dark blue ballpoint pen. HB pencils are allowed for notes, diagrams, or graphs only.
Do not use erasable pens or correction fluid. Cross out mistakes neatly.
A rubber/eraser is allowed to remove pencil marks.
Highlighters are permitted on the exam paper.
Dictionaries are not allowed.

Sole Traders

Sole traders are a common business structure, owned and operated by one person.
Three legal regulations for sole traders:
- Register with, and submit annual accounts to, the Government Tax Office.
- Register the business name with the Registrar of Business Names.
- Adhere to industry-specific laws, such as health and safety regulations or licensing requirements for specific services (e.g., alcohol sales, taxis).
Advantages of Sole Traders:
- Few legal requirements for setting up the business.
- Complete control over the business.
- Freedom to choose holidays, working hours, pricing, and employees.
- Close customer relationships and quick response to customer demands.
- Keeps all profits after tax.
Disadvantages of Sole Traders:
- Sole responsibility for business debts (unlimited liability).
- Limited access to capital (funding).
- Difficulty scaling the business.
- Limited expertise and support for running the business.
- Business ceases upon the owner's death.

Partnerships

A partnership involves two or more people in a business.
Important Partnership Agreement Points:
- Capital contribution from each partner.
- Defined tasks for each partner.
- Profit-sharing arrangement.
- Partnership duration and structure.
- Procedures for adding new partners or in case of partner absence, retirement, etc

Advantages of a Partnership over a Sole Trader

Increased capital.
Shared responsibilities and expertise.
Increased profit potential.
Motivation from shared profits.

Disadvantages of a Partnership over a Sole Trader

Potential disagreements amongst partners.
Unlimited liability (similar to sole trader).
Business ceases on death or withdrawal of a partner.

Private Limited Company

Advantages of a Private Limited Company over a Sole Trader or Partnership.
- Increased capital through share sales (shares sold to finance business expansion).
- Limited liability (only liable for original investment).
- Company can continue if a partner dies.
- Possible ease of transferring shares.
Disadvantages of a Private Limited Company over a Sole Trader or Partnership.
- Significant legal matters are involved in setting up a company,
  - Memorandum of Association
  - Articles of Association
- Regular financial reporting to the registrar of companies.

Laissez-faire Leadership

A leadership style characterized by minimal intervention from the manager and high levels of autonomy for employees.
Decisions driven by employees, who have high degrees of autonomy and freedom.
Issues are addressed only when required by the employees.

Manager Roles

Delegation allows subordinates to handle primary decisions.
Provide support and guidance to subordinates regarding their tasks and projects.

External Costs and Benefits

External Costs: negative impacts on the environment and local communities (e.g., oil spills)
External Benefits: positive externalities of business activities, such as education.

Business Communication Methods

Two-way radios (wireless intercoms) provide real-time and immediate communication, which can improve workplace safety and productivity.
Satellite communication can be a very reliable and fast method for transmission for greater distances.

Pressure Groups

Pressure groups may influence business decisions in the following ways:
- Ethical conducts
- Negative publicity
- Boycotts, encouraging consumer behavior to limit sales

Studying That Suits You

Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

Description

Test your knowledge on sole traders, a common business structure owned by one individual. This quiz covers legal regulations, advantages, and essential requirements for setting up a sole trader business. Get ready to enhance your understanding of entrepreneurial basics!