What is a partnership?

A partnership is a business owned by two or more people who share the decisions, the workload and the profits.

Why might a small bakery choose to form a partnership rather than stay a sole trader?

A partner can bring extra capital to invest in the bakery. A partner also brings new skills and shares the long working hours.

State two disadvantages of a partnership.

Partners can disagree about how the business should be run. Most partners have unlimited liability, so each can lose personal assets to pay the business's debts.

OCR GCSE Business J204

Business Activity

Topic overview Enterprise and entrepreneurship Business planning and the business plan Sole traders, partnerships and limited companies Business aims and objectives Internal and external stakeholders Organic and external growth How business functions depend on each other

Marketing

Topic overview The purpose of marketing Primary and secondary market research Market segmentation Product design and the product life cycle Pricing methods Point of sale promotion and advertising Place and the marketing mix

People

Topic overview The role of human resources Organisational structures and ways of working Communication in business Recruitment and selection Employee motivation and retention Training and staff development Employment law

Operations

Topic overview Production processes Quality of goods and services The sales process and customer service Consumer law Business location Procurement and choosing suppliers Logistics and supply chains

Finance

Topic overview The role of the finance function Sources of finance Revenue, costs, profit and loss Break-even Cash, liquidity and profit Cash flow forecasts

Influences on Business

Topic overview Ethical and environmental considerations The economic climate Globalisation and multinational companies International branding and competition

Business Activity

Sole traders, partnerships and limited companies

3 things to know
Component 01

Overview

Sole traders and partnerships with their advantages and disadvantages, limited and unlimited liability, private and public limited companies, and choosing the right ownership as a business grows.

What you need to know

Answer each one before you reveal it.

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Key term

What is a sole trader?

Evaluation

Give two advantages of being a sole trader.

Evaluation

Give two disadvantages of being a sole trader.

Questions from this subtopic

Each one with the model answer underneath.

1
What is a sole trader?
Model answer
A sole trader is a business owned and run by one person, who takes all the profit and all the risk.
2
Give two advantages of being a sole trader.
Model answer
A sole trader keeps all the profit and makes every decision. A sole trader business is also quick and cheap to set up.
3
Give two disadvantages of being a sole trader.
Model answer
A sole trader has unlimited liability, so personal belongings are at risk. The owner may work long hours with no one to share the workload or cover illness.
4
What is a partnership?
Model answer
A partnership is a business owned by two or more people who share the decisions, the workload and the profits.
5
Why might a small bakery choose to form a partnership rather than stay a sole trader?
Model answer
A partner can bring extra capital to invest in the bakery. A partner also brings new skills and shares the long working hours.
6
State two disadvantages of a partnership.
Model answer
Partners can disagree about how the business should be run. Most partners have unlimited liability, so each can lose personal assets to pay the business's debts.

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Business Activity

Marketing

People

Operations

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Customers may receive quality.

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AOwners may gain from higher profit.

BEmployees may lose jobs or face lower pay.

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Aim means a broad long-term goal of a business.

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