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Business organisations: the private sector 35
Activity 3.1: case study task
Your friend, Amin, is an expert computer engineer. He currently works for a large computer
manufacturer. He thinks that he could run his own successful business. He has no experience of
running a business. He has very few savings to invest into a business.
Amin has a rich uncle who knows nothing about computers! He is a retired businessman. He is
friendly but rather bossy as he always thinks he knows best.
Amin asks for
your advice about whether he should set up his own business and what form of
organisation he should choose. He asks for your help on three questions that are worrying him.
a) What would be the advantages and disadvantages of running his own business rather than
working for the computer manufacturer?
b) Should he set up a sole trader business?
c) His uncle would like to become his partner in the business if Amin decides to go ahead. What
would be the advantages and disadvantages of forming a partnership with his uncle?
Write detailed notes to Amin giving your advice on all three points which are worrying him.
Answers
Answer:
a. ADVANTAGES: 1.financial rewards.
2. lifestyle independence
3. personal satisfaction and growth..
DISADVANTAGES: 1. financial risk
2. stress and health issues
3. time commitment.
b. • create a business name and decide on a location for your business.
•file for a business license with your city or a country,and get permission from your locality if you want to operate your business from home.
•set up a business checking account so don't mixup business and personal spending..
c.ADVANTAGES: • less formal with fewer legal obligation.
• easy to get started
•sharing the burden
• access to knowledge,skills, experience and contacts.
• better decision making
•privacy
• ownership and controlled are combined.
• more partners more capital.
•prospective partners
•easy access to profit.
*DISADVANTAGES:• the business has no independent legal status.
•unlimited liability.
• perceived lack of prestige.
• limited access to capital.
• potential for difference and conflict.
• slower,more difficult decision making.
•profit must be shared.
• personally demanding.
• taxation.
• limited on business development.