Business level 2 m1 unit 1

Task 1: Use the following letter format to reply to Luke Fields: Council House College Green 2nd November 2015 Dear Mr Fields, Thank you very much for your letter, I will now explain to you possible options that a business can have in terms of ownerships. a. Sole trader Sole trader describes any business that is owned and controlled by one person. However they sometimes employ workers An example of a sole trader could be a newsagent’s shop or people who provide a specialist service like hairdressers, plumbers or photographers Problems of being a sole trader Unlimited liability: so this means that the owner is personally liable for all debts.

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Task 1: Use the following letter format to reply to Luke Fields: Council House College Green

2nd November 2015 Dear Mr Fields, Thank you very much for your letter, I will now explain to you possible options that a business can have in terms of ownerships. a. Sole trader Sole trader describes any business that is owned and controlled by one person. However they sometimes employ workers An example of a sole trader could be a newsagent’s shop or people who provide a specialist service like hairdressers, plumbers or photographers Problems of being a sole trader Unlimited liability: so this means that the owner is personally liable for all debts. Can be difficult to raise finance: because they are the only ones that put money into their business. Hard work: sole traders often work long hours and find it difficult to take holidays, or time off if they are ill. Owner can’t share responsibilities with anyone: because there is only one owner in a sole trader company.

b. Partnership A partnership is a business in which two people or more manage and operate the business. Both owners are equally and personally liable for the debts from the business, therefore they both share responsibilities. An example of a partnership could be dentists or solicitors. Benefits of being a partnership Shared responsibilities and work: this allows you to perform tasks related to your particular skills of expertise; therefore you can complement each other’s strengths. Mutual support and motivation: you have a partner to share your decisions with. Shared expenses and risks: all costs are paid by the two owners.

c. A private limited company A private limited company owned by its shareholders, run by directors and, most importantly, where the liability of shareholders for the debts of the company is limited. An example of a private limited company could be Facebook.

Benefits of being a private limited company Limited liability: they are not personally responsible for business debts and obligations of the business, this can help you because you will no longer risk losing your personal assets, e.g., your house if your business fails. Secrecy: a private company is not required to publish its accounts or file several documents. Therefore, it is in a better position than a public company to maintain business secrets. More people to contribute ideas to the business Separate legal entity: this means you are separate from the business which means if the business is found guilty of an incident, e.g. health and safety, you as the owner will not be sued.

My recommendation to you would be that you become a partnership instead of being a sole trader. The reason for this is because you can share responsibilities with someone else, unlike being a sole trader because you have to do everything by yourself. You therefore have a backup as it is not everything on your shoulders. Secondly, with more than one owner, the ability to raise funds may be increased as the partners may be able to contribute more funds and because their borrowing capacity may be greater. Lastly it is good to become a partnership because they provide moral support and will allow for more creative brainstorming.