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Report on mobile phone business

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Report on mobile phone business Date: 04/11/04 To: Mr Khan From: Mohammed VORA 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. ...read more.


ADVANTAGES OF A PARTNESHIP DISADVANTAGES OF A PARTNERSHIP They are very easy to set-up. All of the partners have to make decisions and the more partners there are the higher probability that someone will disagree and this makes it harder for a partnership to continue. They are very easy to RUN When a partner loses interest in working for a business in a partnership this can make it harder to raise money and it harder to run the business. They do not have to employ solicitors or accounts to run the business. The more money a partner puts into a business the more voting rights they are allowed Profits belong to the partners who usually work in the Business. Who will carry on the business in the future when those who set it up retire. The affairs of the partnership can be kept private because only the Tax authorities need to be told how much the partners are earning and what is the profit of the business. Some partnerships don't have a deed of partnership this can lead to many problems if there are disagreements amongst the partners. ...read more.


Overall I have chosen to advise Mr Khan to become a sole trader because I believe that the risks in the disadvantages in having a partnership are higher than becoming a sole trader. A few points may be that any of Mr Khan's partners could make him liable and in most cases he could end up losing everything he owns, in other cases he have many disagreements with the partners and if Mr khan leaves he could maybe leave with nothing. The only high risk in being a sole trader is also again unlimited liability but there is a difference in being a sole trader Mr Khan will be responsible only for his own actions so illness, long hours, etc are actions leading to unlimited liability. If he shuts the shop even for 1 hour he could be losing a lot of money at the same time, this is an action leading to unlimited liability. Another major problem, especially for sole traders is that they need capital; capital is a major problem particularly in this case because Mr Khan will need to have enough capital, in any form for e.g. redundancy money, for his land, if there is any expansions and obviously a lot of money in stock, because new advertises are being released very often. ...read more.

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