When Jameel lost his job with a fruit and vegetable shop that closed down

he decided to open his own store. He had good contacts with suppliers.
They said they would give him one month’s credit before he paid for
supplies. Jameel had $5000 in savings to invest in the shop. He thought this
would be sufficient to start the business. He is an independent man - he
never liked taking the manager’s orders in the food shop! He wanted to
operate his new business as a sole trader

A. What is meant by ‘sole trader?

A person who runs his/her business

B. Identify two other types of business organization

Franchise and partnership

C. Identify and explain two benefits to Jameel of operating his business

as a sole trader

- He will have full control of the business without taking anyone’s

orders
- He can take all the profit without sharing it with other.

D. Identify and explain two drawbacks to Jameel of operating his

business as a sole trader

- He doesn’t have anybody to consult with when having a problem in

the business.
- He need to work long hour and may get sick

E. Do you think Jameel should open new branches of his business by

selling franchises? Justify your answer

Jameel should open new branches of his business because by selling

franchise he can get more profit from the franchisee and if he have a lot of
branches his brand will be popular.

Aurelie and Nadine set up the A and N partnership ten years ago. It
specializes in handmade shoes and boots the business now employs
around 20 people. Demand for these products is increasing rapidly. The
partner need to invest much more capital in the business but they need to
avoid a lot of risk as they both have families dependent on the income
made from the business. Their main competitor is ShoeWork plc, which has
a much larger market share than A and N can afford extensive advertising.
a) What is meant by partnership?

A business that is run by 2-20 people

b) Identify two benefits to Aurelie and Nadine of the partnership legal

structure

- One of the benefits of running a partnership business is that both

Aurelie and Nadine will have less stress due to distribution of task.
- If Aurelie is ill, Nadine can still help managing the business. On the
other hand, if Nadine is sick, Aurelie can take control of managing the
business.

c) Identify and explain two possible benefits to ShoeWork plc of being a

public limited company

- There is a limited liability for the shareholder. His financial liability

limited.
- The business has separate legal entity.

d) Identify and explain two drawbacks of the partnership form of legal

structure to Aurelie and Nadine

- The profits have to be shared equally. Sometimes it can cause them to

a fight as well. If one takes the profit more than it should be, it can lead
them to conflict.
- If they have a conflict the business will not be going well

e) If the a and N partnership business continues recommend whether a

private limited company is suitable form of legal structure for this
business justify your answer by considering the advantage and
disadvantages of a private limited company.

The advantages
- Shareholder have limited liability
- More capital can be raised
Disadvantages
- The share can’t be sold or transferred to anyone else without the
agreement of all the shareholders
- The accounts of a company are less secret