Theory question 101
Business UnitsCommerce 2 (answer five questions)
Akani and Sule are sole proprietors. Akani proposed that their businesses be merged to form partnership
(a) Explain to Sule how such a partnership would be to their mutual benefit
(b) State reasons why Sule might be reluctant to accept the proposal.
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(a) Benefits, explained: more capital pooled from two owners; joint decisions and wider skills/experience; division of work and specialisation; losses and risks shared; easier to borrow (two people's security); business can expand and compete better; continuity when one partner is ill or away.
(b) Reasons for reluctance: loss of sole control – decisions must be shared; profits must be shared; unlimited liability – he may lose private property because of Akani's actions; partners are bound by each other's acts; disagreements may arise; partnership may end on death, bankruptcy or withdrawal of a partner; partner's share cannot be transferred without consent; loss of privacy of his business affairs.
Write from the point of view of the two sole traders, contrasting with sole proprietorship.