WHAT ARE THE ADVANTAGES AND DISADVANTAGES FOR DIFFERENT BUSINESS TYPES?

• ASSESS THE BENEFITS AND COSTS OF BEING A SOLE TRADER, PARTNERSHIP OR A REGISTERED COMPANY.

FOR EACH TYPE OF BUSINESS TRY TO COME UP WITH AS MANY ADVANTAGES AND DISADVANTAGES AS YOU CAN

SOLE TRADER PARTNERSHIP REGISTERED COMPANY

Advantages:

Disadvantages:

SOLE TRADER PARTNERSHIP REGISTERED COMPANY

Advantages• Owner works for

him/herself• Low start up costs• Few legal

requirements• Owner keeps all

profits• Owner has full

control of business

• Owners are self employed

• Owners have full control of business and profits

• Few legal formalities

• Incorporated business

• Owners have limited liability

• Access to greater sources of funding

• As a separate legal entity has continuity of existence and can be transferred to new owners

Disadvantages• Unlimited liability

for owner• Few sources of

finance• Owner

responsible for all aspects of the business

• Usually involves hard work and long hours

• Unlimited liability for each owner

• The partners have full responsibility for all aspects of the business

• Disagreements between partners may cause difficulties with the business

• The business may not survive the loss of one of the partners

• Complicated to set up • Subject to more legal

constraints• Requires larger, more

cumbersome and expensive administration

• Decision making may be slower

• Needs approval of other shareholders to sell shares

MARKS AND SPENCER PLC (ALSO KNOWN AS M&S) IS A BRITISH RETAILER HEADQUARTERED IN LONDON, WITH OVER 700 STORES IN THE UNITED KINGDOM AND OVER 300 STORES SPREAD ACROSS MORE THAN 40 COUNTRIES. IT SPECIALISES IN THE SELLING OF CLOTHING AND LUXURY FOOD PRODUCTS

1884 Russian Michael Marks hires a stall in Kirkgate market, Leeds, UK.

  Reasons for becoming a partnership: List them here

1894 + Marks forms a partnership with Tom Spencer.

  Reasons for becoming a registered company: List them here

1926 Marks & Spencer Limited becomes a registered company.

You will see three Business situations.

You have to decide which is the best type of business in each of the situationsA

ctiv

ity

Scenario 1: Cancer Drug Designers

Professor Michelle Yeoh and Doctor Charles Crocker have worked in the cancer research department of a university for a number of years. They are leaders in their field.

Now they think they would like to take their ideas and set-up a business designing a Breast Cancer Drug. Though they think they are pretty close to a discovery they will need to take the drug through a number of years of trials to prove it is safe, this will be very expensive ($millions).

If they are successful in designing a drug that cures breast cancer and they are able to sell it could easily be very successful ($ 10’s of millions).

Your Task: You are to act as a business advisor to the Doctors

1. You should suggest a form of business organisation that

will suit their needs.

2. What legal documents they will need to set-up this business.

3. Fully explain the effectiveness of the business structure you have chosen. This will involve explaining the advantages and disadvantages of this business structure over the next best alternative

http://www.legislation.govt.nz/regulation/results.aspx?search=ts_regulation_standards_resel&p=1

http://www.medsafe.govt.nz/index.asp

Jen had always enjoyed making clothes, especially dresses. She still remembers the day she won the best dressed person at her school ball. After a couple of years working for somebody else she has decided to go into business producing ball gowns.

She intends to work from home and therefore the set-up costs are not too serious but, she does need some equipment, especially a car to meet clients and an overlocker (for hems).

She had been saving for University and has decided that she will invest this money into her business, but this will not be enough.

Scenario 2: Dress Designer

Your Task: You are to act as a business advisor to Jen.

1. You should suggest a form of business organisation that will suit her needs.

2. What legal documents she needs to set-up this business.

3. Fully explain the effectiveness of the business structure you have chosen. This will involve explaining the advantages and disadvantages of this business structure over the next best alternative

4. How she might change their organisation in the future.

Scenario 3: Web Designers

Ian and Scarlet, an older married couple, retired a few months ago. Ian misses being involved in work and would like a part-time job while Scarlet is quite prepared not to work. Ronny, who is Ian’s son, worked for a Web Design Company but wants to set-up on his own.

They all have money to invest into the business:-

Ronny ($20,000)Ian ($10,000)Scarlet ($20,000)

They need an office and some expensive equipment which will cost more than they have to invest.

Your Task: You are to act as a business advisor to Ronny, Scarlet and Ian.

1. You should suggest a form of business organisation that will suit their individual needs.

2. What legal procedures they need to set-up this business.

3. Fully explain the effectiveness of the business structure you have chosen. This will involve explaining the advantages and disadvantages of this business structure over the next best alternative

4. How they might change their organisation in the future.