Sole Traders Overview

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Questions and Answers

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 name of the business is significant. The name must be registered with the Registrar of Business Names. (correct)

The owner must register with, and send annual accounts to, the Government Tax Office. (correct)

What are three advantages to sole traders of running their own business?

Three advantages include: Few legal regulations when setting up, being your own boss with complete control, and having the freedom to choose holiday times, work hours, and pricing.

What five main points would be important to include in the partnership agreement for Mike and Dave's taxi business?

The five main points include: The amount of capital invested by each partner, the tasks each partner will undertake, the way profits will be shared, the duration of the partnership, and arrangements for absence, retirement, and new partner admission.

Name three types of advantages that have become clear to Mike since his partnership with Dave?

Three advantages of the partnership include: More capital to invest, shared responsibilities and specialisation, and increased motivation due to profit sharing and loss sharing. Signup and view all the answers

Name three types of disadvantages that Dave is worried about related to their partnership?

Three disadvantages of the partnership include: Unlimited liability for both partners, lack of a separate legal identity for the business, and the possibility of disagreements or dishonest behavior by one partner. Signup and view all the answers

List three benefits of forming a private limited company.

Three benefits include: Access to more capital through share sales, limited liability for shareholders, and sustained control over the business by original founders. Signup and view all the answers

List three disadvantages of forming a private limited company.

Three disadvantages include: Complex legal requirements and documents, less secrecy in financial reporting, and the possibility of disagreement among partners. Signup and view all the answers

Define 'laissez-faire leadership style'.

A laissez-faire leadership style involves minimal supervision and high levels of autonomy for employees, with intervention only requested or provided when necessary. Signup and view all the answers

Where does the term 'laissez-faire' come from, and what does it mean?

The term 'laissez-faire' comes from the French language, meaning 'allow to do.' Signup and view all the answers

Identify two roles of a manager.

Two roles of a manager include: Delegating decision-making to employees and providing support, guidance, consultation, and training when needed, while trusting them to execute their work independently. Signup and view all the answers

Outline one external cost and one external benefit that Millie's business activities might create.

One external cost associated with Millie's oil company is the potential for environmental damage, oil spills, and health risks to local communities. One external benefit is the positive contribution of education, which benefits society as a whole. Signup and view all the answers

Explain two methods of IT-based communication that Millie might use with its employees.

Two methods include: Two-way radios for real-time communication, which enables immediate feedback and coordination, and satellite communication for working offshore, allowing for reliable long-distance data transmission. Signup and view all the answers

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.

Boycotting can encourage customers to stop buying a company's product. Signup and view all the answers

Study Notes

Exam Instructions

Insert personal details (date, class year, nickname) in provided spaces on the exam paper.
Use black or dark blue ballpoint pen. HB pencils are allowed for notes/diagrams/graphs only.
Do not use erasable pens or correction fluid; neatly cross out mistakes. Rubber/eraser permitted to remove pencil marks.
Highlighters permitted on question paper.
Dictionaries are not allowed.

Sole Traders

Sole traders are the most common type of business organization; owned and operated by one person.
Three legal regulations:
- Register with and submit annual accounts to the Government Tax Office.
- Register business name with the Registrar of Business Names.
- Comply with industry-specific laws (e.g., health & safety, licensing for alcohol sales/taxi operations).
Advantages of sole trading:
- Few legal regulations for setting up.
- Complete control over business decisions.
- Flexibility in setting hours, choosing employees, and pricing.
- Close customer relationships and rapid responses to customer needs.
- Keeps all profits after taxes.
Disadvantages of sole trading:
- Unlimited liability: the owner is personally responsible for all business debts.
- Limited access to finance.
- Difficult to expand due to a lack of funding, if the owner is ill the business might stop, has no continuity.
- No one to discuss business matters with, no support.

Partnerships

A partnership is a business owned and run by two or more people.
Important points for a partnership agreement:
- Capital investment by each partner.
- Duties/tasks of each partner.
- Profit sharing arrangements.
- Dispute resolution procedures.
- Partnership duration.
- Partner absence or retirement.

Private Limited Companies

Advantages
- Limited liability: shareholders' personal assets are protected from business debts.
- Easy to raise capital through the sale of shares.
- Business continuity: the business continues if a shareholder dies, or leaves.
Disadvantages:
- More complex legal setup than a sole trader or partnership, compliance related costs.
- Published financial accounts (less secrecy).

Management Roles

Delegation: empowering employees to make decisions.
Support, guidance, and training to employees.

External Costs and Benefits

Millie's business activities may create external costs such as environmental damage (oil spills).
External benefits include education as more people are educated, society's productivity rises.

IT Communication Methods

Using two-way radios (wireless intercoms) for real-time communication
Satellite communication for remote locations.

Pressure Groups

Pressure groups influence business decisions using a range of ways such as media coverage, customer boycotts, or ethically encouraging behaviour.

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Description

This quiz covers the essential aspects of sole traders, including their definition, legal regulations, and advantages. Understand the basics of operating as a sole trader and the responsibilities involved. Ideal for students studying business or entrepreneurship.