Term 2 - Summaries (Sole Proprietor & Partnership)

Question 1

Provide a definition of a SOLE PROPRIETOR

Answer 1

• Person is the only owner
• keep ALL the profits (after taxes paid)
• liable for all LOSSES

Question 2

Name a few examples of a SOLE PROPRIETOR

Answer 2

Financial Planner
Offering tutoring services
Run a catering company
Run a landscaping company

Question 3

Name the CHARACTERISTICS of a sole proprietor

Answer 3

• ONE owner
• no CONTINUITY
• own CAPITAL
• UNLIMITED liability
• RELATIONSHIP with clients
• Easy and CHEAP
• PROFIT
  *TAX PIT

Question 4

ADVANTAGES of a Sole Proprietor

Answer 4

+ cheap and easy
+ quick decisions
+ profit (all yours)
+ work hard (no-one else)
+ alround experience
+ personal contact with clients
+ no formal documentation

Question 5

DISADVANTAGES of a Sole Proprietor

Answer 5

• overwork
• no continuity
  
  • no job security
    
    • capital is limited
      
      • does not pay high wages
        
        • no legal entity
          
          • may not negotiate discounts
            
            • neglect some business functions

Question 6

Characteristics of a PARTNERSHIP

Answer 6

= 2+ partners
= partnership AGREEMENT in place
= unlimited LIABILITY (jointly and severally liable)
= no CONTINUITY
= Cash, skills or capital
= Progressive Income TAX

Question 7

ADVANTAGES of a partnership

Answer 7

+ Easy, quick and cheap
+ more capital available
+ share expenses, tasks, responsibilities
+ easier to get credit
+ motivated

Question 8

DISADVANTAGES of a partnership

Answer 8

• Unlimited liability
• Incompetent partner (this affects the business)
• No continuity