Question

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) Identify and explain two advantages and two disadvantages to Amin of running his own
business rather than working for the computer manufacturer
b) Do you think he should set up a sole trader business?
c) Explain your answer.
His uncle would like to become his partner in the business if Amin decides to go ahead
Identify and explain two advantages and two disadvantages to Amin of forming a
partnership with his uncle

Answer 1

a) Owning and running his own business is beneficial as he gets the freedom to choose his own working hours
It is also beneficial as 100% of the profits goes to Amin.
However, there is always risk of failure when running his own business
Also, Amin does not have enough capital to start up his business.

b) No.

c) A sole trader business would mean he has to invest ALL of his money into the capital of the business, which may not be enough to make it successful.

d) An advantage of a partnership business is that you spread the risks out. Next, The combined capital of both people is significantly better then one. This means more money is invested in the business.

However, it seems that they disagree on many things. This is problematic as Amin may have business plans that his uncle disagrees on which will cause conflict.
Also, the profits would be divided among them so Amin would lose out on half of the profits he could have got if he was a sole trader.