LESSON PLAN 2 – TYPES OF OWNERSHIP
Aim
This lesson helps students to learn about sole traders and partnerships, showing the way businesses are set up, and the way in which they operate.
Preparation
Students need a copy of the gapped handout – Sole Traders and Partnerships - to complete during the lesson, writing instruments and access to ICT/Internet; copies of old Yellow Pages, or large advertisements from newspapers and a blank handout of the Partnership Agreement.
Differentiated target
By the end of the lesson:
- All students will be able to describe the type of ownership and the type of liability that the owners have.
- Most students will be able to give a clear and coherent explanation of the type of ownership and liabilities.
- Some students will be able to give a detailed explanation of why the particular ownership is appropriate to a particular business and how this might affect the owners’ liabilities.
Activities
On whiteboard: “Use the Yellow Pages, Internet (www.yell.com) and/or newspapers and list all those businesses you think are owned by one or more people.”
(15 minutes)
Students try and identify sole traders and partnerships.
Thought starter
(15 minutes)
From the businesses identified, students state those likely to be sole traders or partnerships. Correct answers displayed on whiteboard.
(15 minutes)
(a) General discussion: for the production of the calendars, do students need to form a business? What about liability?
(15 minutes)
(b) Use the calendar production business, what are the advantages of being a sole trader? Partnership?
(c) What are the disadvantages?
(25 minutes)
(d) Students complete Handout ‘Advantages and Disadvantages of Sole Traders and Partnerships’
(5 minutes)
(e) Answers checked by teacher/other students
(25 minutes)
(f) Using the example of a Partnership Agreement document, students complete these in their Enterprise groups. They do not need to have decided to run their enterprise group as a partnership.
This document needs to be kept in their portfolio as evidence. (A blank one of these can already be on the computers ready for completion).
Expected outcome
(g) Each Enterprise group will have produced a Partnership Agreement for their particular business.
(h) Each student will have completed a gapped Handout about advantages and disadvantages of being a sole trader or a partnership, as evidence for the GCSE Applied Business portfolio.
Plenary
(10 minutes)
(i) Definition of unlimited liability on the whiteboard – in a jumbled format. Students have 5 minutes to write out a correct definition: Unlimited liability means the owner is completely responsible for all the business debts. If they cannot pay these debts, they can have their possessions sold.
SOLE TRADERS AND PARTNERSHIPS
1. Complete the following:
SOLE TRADER:
A sole trader is an ________________________ who has set up in ________________________. The sole trader owns, ________________ and is the business. A _________________ is a business that is _________ and run by ____________________person. Most small businesses are run as _____ __________________________. To start trading as a sole trader, a person has to inform the __________________ ________________ that the business is a sole trader, then starts trading. Sole traders make up about ____ _________ of all businesses. Sole traders often work __________, although they may employ _________________, just like any other business.
people owned individual controls Inland Revenue business one sole traders two-thirds alone sole trader
2. Advantages and Disadvantages of being a sole trader
Create a table using the list below. Separate the advantages from the disadvantages.
You do not get much holiday
It is easier to set up the business in the first place
You have unlimited liability for all the business debts
You are your own boss
You need to be an expert at everything
It is risky
Less form-filling
It is less easy to raise money
You do not have to share the profits with anyone else
You work long hours
You cannot afford to be ill
3. Complete the following:
PARTNERSHIP:
A partnership is a __________________ of individuals working together in a business with the ___________ of making a _________________. Many businesses in the UK are ____________________. They include doctors, ____________ and ______________________. Partnerships are __________ by all the _________________ and can raise more _________ than sole trader businesses, simply because there are more __________ to contribute. A partnership is ___________ to set up. Partnerships are regulated in ________ by the ______________ __________ 1890 and also by any _________________ ________________, which has been drawn up. Like the sole trader a partner has _________________ _______________.
unlimited liability easy aim partnerships
group solicitors owned money Partnership Act
profit dentists partners(2) Partnership Agreement law
4. Advantages and Disadvantages of being a partnership
Create a table using the list below. Separate the advantages from the disadvantages.
Each partner has unlimited liability for all the dealings of the partnership
Shared responsibility
Disagreements can occur
Profits have to be shared between the partners
Each partner has unlimited liability for all the partnership debts
Cover is available for illness and holidays
Less freedom as you have to consult others
More expertise (skills) will be available
In your Enterprise Groups, you may be set up as a partnership - so complete the Partnership Agreement below:
PARTNERSHIP AGREEMENT
MADE on: (date)
BETWEEN: (names of partners)
IT IS HEREBY AGREED AS FOLLOWS
1. (Names of partners) will become and remain partners for a period of (insert time) years from the date of this Agreement.
2. The partners shall practise in partnership in the firm name of (insert name of business) at the address of (school’s address)
3. The initial capital of the partnership shall be in the sum of (insert amount of money to be invested by all the partners) to be contributed equally.
4. The partners shall be entitled to the net profits arising from the business in equal shares, or such other shares as may from time to time be agreed by the partners.
5. Each partner shall be entitled to (insert time) weeks’ holiday in each year.
6. Should any dispute arise at any time between the partners with regard to this agreement or in respect of the rights, duties and liabilities of the partners in the conduct of the partnership business, then an independent Arbitrator shall be appointed. Both partners shall accept the ruling of the independent Arbitrator.
Signed by:
(insert name of partner and address)
in the presence of (name of person outside the business – teacher and address)
Signed by
(insert name of other partner and address)
in the presence of (name of person outside the business – as above)
(Repeat this until all the partners are named and can sign).
QUIZ – SOLE TRADERS AND PARTNERSHIPS
1. Which government body does a sole trader have to inform before starting to trade?
(a) Department of Trade
(b) Inland Revenue
(c) Customs & Excise
(d) Department of Education
2. Which of the following is a business owned and run by a single person?
(a) Public Limited Company
(b) Partnership
(c) Private Limited Company
(d) Sole Trader
3. If a sole trader or partnership goes bankrupt, the owner(s) have to pay any debts themselves. This is called:
(a) limited liability
(b) unlimited liability
(c) personal responsibility
(d) debt payment
4. What is the document usually drawn up by a solicitor that states details about a specific business owned by several partners?
(a) Certificate of Incorporation
(b) Certificate of Trade
(c) Partnership Agreement
(d) Annual Accounts
5. A sole trader is unincorporated, what does this mean?
(a) the sole trader does not have to keep any financial records
(b) when the sole trader dies, the business ceases to exist
(c) the sole trader cannot expand
(d) the sole trader must pay extra taxes
