Sole Traders Overview

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Questions and Answers

What is an advantage of being a sole trader regarding legal requirements?

They must register with multiple agencies

There are few legal regulations when setting up the business (correct)

There are numerous legal regulations involved

They require extensive paperwork to initiate

Which of the following is a disadvantage of being a sole trader?

Availability of large bank loans

Limited control over business decisions

Guaranteed profits after taxes

Unlimited liability for business debts (correct)

What is a key benefit of being a sole trader in terms of customer interaction?

No need to interact with customers at all

Limited feedback from customers

Ability to hire a personal assistant for managing customers

Close contact with customers for better service (correct)

In a partnership agreement, what is an important point regarding investment?

The amount of capital invested by each partner Signup and view all the answers

Which of these is NOT a common disadvantage of sole traders?

They can pass their business to family members Signup and view all the answers

What arrangement is NOT typically included in a partnership agreement?

The social events for the partnership Signup and view all the answers

How does unlimited liability affect sole traders?

They can be forced to sell personal possessions to cover debts Signup and view all the answers

For a sole trader, which statement about working hours and holidays is true?

They have the freedom to choose their own schedule Signup and view all the answers

What advantage did Mike identify related to capital investment in the partnership?

More capital can be invested due to the partner's savings. Signup and view all the answers

What is a potential disadvantage regarding liability in a partnership?

Creditors can claim partners' personal property if the business fails. Signup and view all the answers

What is a sole trader?

A business owned and operated by just one person. Signup and view all the answers

Which of the following is NOT a legal regulation that sole traders must follow?

The sole trader must advertise their business name on television. Signup and view all the answers

How does the legal identity of a partnership affect its continuity?

The partnership ceases if one partner dies. Signup and view all the answers

What was one concern Dave had about the partnership model?

Decisions can take time due to consulting all partners. Signup and view all the answers

Why is the business name significant for a sole trader?

It must be unique and registered with the appropriate authority. Signup and view all the answers

What benefit do Mike and Dave hope to gain by forming a private limited company?

Protection of personal assets from business debts. Signup and view all the answers

Which of the following laws must a sole trader adhere to in certain industries?

Health and safety laws and licensing requirements. Signup and view all the answers

What document must a sole trader send to the Government Tax Office annually?

Annual financial accounts. Signup and view all the answers

Which of the following is not a disadvantage of a partnership?

Profits are always shared equally. Signup and view all the answers

What type of pen is recommended for completing the exam paper?

Ball Point Pen in black or dark blue. Signup and view all the answers

What is an advantage of the partnership that encourages hard work?

Shared motivation because both benefit from the profits. Signup and view all the answers

How does the inefficiency of one partner affect a partnership?

The other partner could suffer financially from the inefficient partner's work. Signup and view all the answers

Which of these materials are allowed for notes during the exam?

HB pencils for notes, diagrams, or graphs. Signup and view all the answers

Which of the following accurately describes the instruction regarding dictionaries?

Dictionaries are not allowed. Signup and view all the answers

What is one major benefit of selling shares for a business?

It can lead to larger sums of capital for expansion. Signup and view all the answers

What does limited liability mean for shareholders?

They can only lose their original investment if the company fails. Signup and view all the answers

What is one disadvantage of forming a private limited company?

The need to deal with significant legal documentation. Signup and view all the answers

What must be sent to the registrar of companies during the formation of a private limited company?

The articles and memorandum of association. Signup and view all the answers

Why are the accounts of a company less secret compared to a sole trader?

Public can inspect the latest accounts each year. Signup and view all the answers

What style of leadership is utilized by some managers at Millie?

Laissez-faire leadership. Signup and view all the answers

What is one of Millie’s business practices regarding communication?

Utilizing IT-based methods for internal communication. Signup and view all the answers

What challenge can arise from Millie's business activities?

Creating external costs and benefits. Signup and view all the answers

What does the term 'laissez-faire' mean in English?

Allow to do Signup and view all the answers

Which best describes a key characteristic of a laissez-faire leadership style?

High level of autonomy for employees Signup and view all the answers

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

Environmental damage from production Signup and view all the answers

Which of the following is an external benefit of education?

Increased knowledge for society Signup and view all the answers

What is one method of IT-based communication that allows real-time feedback among workers?

Two-way radios for immediate communication Signup and view all the answers

Which of the following methods might a pressure group use to influence business decisions?

Creating bad publicity through media coverage Signup and view all the answers

What is a potential downside of using satellite communication?

High costs and weather vulnerability Signup and view all the answers

What role involves providing support and guidance to employees while trusting them with their tasks?

Delegation Signup and view all the answers

Study Notes

Exam Instructions

Insert details (date, class year, nickname) in provided spaces.
Use black or dark blue ballpoint pen. HB pencils for notes/diagrams/graphs only.
Do not use erasable pens or correction fluid.
Correct mistakes by neatly crossing them out.
Use rubber/eraser for removing pencil marks.
Highlighters are allowed.
Dictionaries are not allowed.

Sole Traders

Sole traders are a common business structure, owned and operated by one person.
Three legal regulations to follow:
- Register with the Government Tax Office and submit annual accounts.
- Register the business name with the Registrar of Business Names.
- Comply with industry-specific laws (e.g., health and safety, licensing for alcohol sales/taxi operations).
Advantages of Sole Trading:
- Few legal regulations for starting up.
- Complete control over the business.
- Freedom to choose hours, holidays, and employee hiring.
- Direct customer contact and quick response to customer needs.
- All profits after taxes belong to the owner.
- No need to share business information with anyone (except Tax office).
Disadvantages of Sole Trading:
- Owner bears full responsibility for business debts.
- Unlimited liability (personal assets at risk).
- Limited access to capital/financing.
- Difficulty expanding the business due to a lack of funds.
- Business ends at owner's death, no continuity.
- No one to discuss business matters with.

Partnerships

Partnerships involve at least two people who jointly own and manage a business.
Key aspects of a partnership agreement:
- Capital investment by each partner.
- Tasks to be performed by each partner.
- Profit-sharing arrangements.
- Duration of the partnership.
- Procedures for handling absences or adding new partners.

Private Limited Companies

Benefits of forming a private limited company:
- Ability to sell shares, raising substantial capital compared to sole proprietorship/partnership.
- Limited liability for shareholders (protection of personal assets).
- Company continues to exist even if owners leave or die, maintaining business continuity .
Disadvantages of forming a private limited company:
- Complex legal procedures for company formation (memorandum & articles of association), dealing with the registrar of companies.
- Public disclosure of accounts, losing secrecy and discretion.

Management Roles

Delegation: Empowering employees to make decisions.
Support/guidance/training to employees to handle tasks.

External Costs/Benefits (Business)

External costs: Negative effects on environment/community arising from business activities (e.g., pollution, oil spills, accidents).
External benefits: Positive effects extending beyond the company (e.g., education improves society, skilled employees).

Communication Methods

Two-way radios (wireless intercoms): Real-time communication, immediate feedback on tasks.
Satellite communication: Reliable over long distances (business locations off-shore); however, can be expensive and vulnerable in bad weather.

Pressure Groups and Business Decisions

Pressure groups can influence businesses through:
- Promoting ethical behavior through awareness campaigns.
- Media coverage for negative publicity.
- Encouraging boycotts to hinder sales.

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Description

This quiz covers the structure and legal regulations of sole traders, including their advantages and operational guidelines. Test your knowledge on starting a sole trading business and the related legal requirements. Ideal for students learning about business structures in 10th class.