Report on Mobile Phone Business

Terms of reference:

In this report I will examine the business of Mr Khan's mobile phone shop and advise him on which legal form he should take; either setup a sole trader or go into partnership. I will study all the advantages and disadvantages of sole trader and a partnership business.

Finding:

Advantages of a sole trader

Disadvantages of a sole trader

Easy to setup and to run- not many forms to be filled in.

Unlimited liability- If the business is bad then it is possible for the owner to lose everything they own.

All profits go to the owner- he/she themselves.

Lack of continuity- The business could be sold by the owner or it could be passed onto their children or all of its assets could be sold off. He/she are their own boss- has complete control over what happens and what doesn't.

Illness- If the sole trader was to fall ill then the business could be forced to shut and the income and profits would stop.

There are tax advantages such as, national insurance contributions; this saves a sole trader hundreds of pound on profits, and this saves them setting up a limited company and having to become an employee of a company.

Long Hours- The sole trader has to work long hours to keep the business afloat.

Labour relations- when and if a sole trader employs workers the relation between them is likely to be good because the business is so small and the owner has to be able to trust the employers.

Difficulty of raising capital- Many sole traders do not have a capital to start off a business therefore a sole trader could borrow capital/money from the Banks/Building Society, which means they have to pay interest on the capital borrowed.

Flexibility-Sole Traders can decide when they want to open and close the shop.

Limited specialisation- The sole trader only has a certain amount of areas they can specialise in therefore they can not gain the advantage of division of