Unincorporated Businesses
Unincorporated Businesses
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New in Stock - Preliminary Exam Business Report Samples (Band 6 Exemplar)
Sole trader:
Sole trader:
A business owned by one person who provides all finance, takes all risk, makes all decisions.
Unlimited liability; individual personally responsible for debts of business.
Owner and business regarded as the same legal entity; when owner dies, so does business.
Easy to establish, cheap to set up; most popular legal structure.
Can employ other people to complete work tasks.
Sole Trader Advantages
Sole Trader Advantages
Low cost of entry; simple legal structure; less costly to establish / run
Complete control by owner
Fewer disputes
Owner keeps all profit from the business operations
Less government regulation
No tax on profits; only on personal income (no double taxation)
Sole Trader Disadvantages
Sole Trader Disadvantages
Unlimited liability for business debts
Business ends upon death of owner
Challenges if sick (lost income)
Must carry all business losses during establishment (high risk)
Must perform all varieties of business tasks (limited experience)
Hard to raise finance to expand (all based upon personal assets)
Partnership:
Partnership:
A business owned by 2—20 people with unlimited liability; all partners responsible for debts of business.
Partnership Agreements lays out duties and responsibilities of each partner (silent / active?).
Allows for pooled funds and draws upon the various talents of individual partners.
Easy to establish, cheap to set up (more time than sole trader)
Partnership Advantages
Partnership Advantages
Low cost of entry, simple legal structure; less costly to establish / run
Shared responsibility / workload; pooled talent to specialise on business functions (better results)
Pooled funds and shared risk (larger purchases)
No taxes upon profits; only on personal income of partners (as detailed in the Partnership Agreement)
Partnership Disadvantages
Partnership Disadvantages
Unlimited liability on owners for all business debts (partner personal debt prior to establishment a factor)
Possibility of disputes (workload, business direction, responsibilities, performance; need Partnership Agreement)
Challenges in finding suitable partners (friendships can be ruined)
Divided authority; difficulty in decision-making.
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