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Business AS CIE

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  1. enterprise as
    6 主题
  2. business-structure as
    6 主题
  3. size-of-business as
    3 主题
  4. business-objectives as
    3 主题
  5. stakeholders-in-a-business as
    2 主题
  6. human-resource-management as
    8 主题
  7. motivation as
    4 主题
  8. management as
    2 主题
  9. the-nature-of-marketing as
    7 主题
  10. market-research as
    3 主题
  11. the-marketing-mix as
    6 主题
  12. the-nature-of-operations as
    3 主题
  13. inventory-management as
    2 主题
  14. capacity-utilisation-and-outsourcing as
    1 主题
  15. business-finance as
    2 主题
  16. sources-of-finance as
    3 主题
  17. forecasting-and-managing-cash-flows as
    1 主题
  18. costs as
    4 主题
  19. budgets as
    1 主题
课 2, 主题 2
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business-structure business-ownership-sole-traders-and-partnerships

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Exam code:9609

Sole traders

  • When an entrepreneur starts a business, they will often start operating as a sole trader

    • This is a business with a single owner (although they may still hire employees)

Examples of sole trader businesses

Example

Description

Nico’s Auto-Cleaning

  • 19-year-old Nico runs a car cleaning service using eco-friendly products

Jan’s Bike Repairs

  • Ben is a mobile cycle mechanic covering suburban Stockholm

Taste of Kerala

  • Larissa is a street-food vendor at weekend markets and music festivals

PixelPup Design

  • Mohan is a freelance graphic-designer serving small charities online

  • Sole traders often run their business alone and so need to have a varied skillset, including:

    • Money skills: set sensible prices, keep basic records and monitor cash coming in and going out so the business doesn’t run out of money

    • Great customer service: be friendly, reliable and helpful so people come back and tell their friends

    • Simple marketing and selling: spread the word on social media or in the local area and feel confident asking for the sale

    • Problem-solving and resilience: stay calm when things go wrong (like late payments or lost stock) and find quick fixes

Evaluating a sole trader setup

Advantages

Disadvantages

  • Easy and inexpensive to set up

  • The owner has complete control over the business

  • All profits belong to the owner

  • Simple tax arrangements

  • Decisions can be made very quickly so the business can react swiftly to market change

  • High levels of personal satisfaction

  • Unlimited liability, meaning the owner is personally responsible for any debts the business incurs

  • Limited access to finance and capital

  • Limited skill sets

  • Difficult to take time off from the business

  • Over time, sole traders may change the form of business

    • By forming a partnership or becoming a private limited company with limited liability they can access more funding or provide more security for the owners

Partnerships

  • A partnership involves two or more people joining together to own a business

    • They are relatively easy to set up with relatively few legal formalities

    • Partners may choose to draw up a deed of partnership which states the formal rights of each partner including

      • The amount of capital contributed by each partner

      • How profits or losses are shared amongst partners

      • The procedures for dissolving the partnership and taking on new partners

      • The level of control each partner has

    • Examples of business that commonly operate as partnerships include lawyers, accountants and doctors

Evaluating a partnership setup

Advantages

Disadvantages

  • Easy and inexpensive to set up and run, as there are few legal formalities

  • Shared responsibilities and decision-making

  • More skills and knowledge means partners can specialise in their area of expertise

  • Increased access to finance and capital

  • Partners also have unlimited liability for debts incurred by the business

    • In some countries it is possible to set up as a limited liability partnership, which removes this risk

  • Partners’ decisions are legally binding on all owners

  • There is potential for disputes between partners

  • Profits are often shared equally regardless of a partner’s contribution

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