Section A:

1. Definition
Sole trader sole trader also known as sole proprietorship. Sole trader is an
unincorporated company in which it run and owned by 1 person. The
owner of sole trader has unlimited liability for all their debts
(Government Digital Service, 2012)
Partnership A company with 2 or more people running the company together, they
both own and share income. All partners share profit and loss,
partnership entity must go with its operators (Qld.gov.au, 2017)
Private company
Public company

2. Characteristics
Sole trader + the main characteristic of sole trader is the person who owns and runs
the business also the management and they could hire assistant to
control the business activities.
+ second characteristic is sole trader company's owner have limited
liability. For example, some small and household company such as
salon, grocery (Government Digital Service, 2012)
+ sole trader has easier tax reporting process by sole trader to report
business income and expenses on schedule C of PIT return.
Additionally, sole trader is allowed to be taxed at the owner's own rate
+ Investments cannot be raised by selling shares or buying shares from
partners
Partnership  Partnerships have 8 characteristics including
+ membership: from 2 to 100 people and they need to have full legal
capacity (Business Jargons, 2016)
+ unlimited liability: individual and joint liability for all debts and
obligations of the company
+ sharing and loss according to signed agreement, if there is no
agreement between general partners, profit and loss will be equally
divided (Business Jargons, 2016)
+ mutual agency: a member has unlimited and joint responsibility.
which means each partnership member's activity forces both the
company and their own copy (representative for all the company)
+ voluntary registration (not compulsory but recommended) brings
benefits to the company
+ continuity: partnership can be dissolved when the partnership ends,
e.g., retirement, bankruptcy, or insanity of any general partner. If the
partners still want to stay active, they must sign a new agreement
+ contractual relationship: a relationship between the members of a
partnership that has a contract including written, oral or implied
 contracts (Business Jargons, 2016)
+ transfer of interest: need the consensus (unanimous) of all partnerships
when having interest transfer for any others company (Business Jargons,
2016)
Private company
Public company

3. Legal structure
Legal entity Ownership Liability Life cycle
Sole trader Does not Owner is 1 Unlimited Depend on owner life
exist any person and finance value of
Partnership legal person Owners are company
minimum 2
people
Private Legal person The number at a Limited Unlimited duration of
company is existing range of 2-100 existence, does not
owners depend on the owner
Public The number of and owner’s financial
company owners is not ability
limited

4. Formation
Sole trader Step 1: checking the suitable of being a sole trader
When sole trader company be set up, owner need to tell HMRC (Her
Majesty's Revenue and Customs) that tax is paid through self-
assessment and a tax return have to be filed every year.
Step 2: name choosing for company which you want to use and
trade under
Name
Step 3: check records which need to be kept
Sole trader’s responsibilities include business’s records, expenses
keeping and personal income’s records
Step 4: tax registration
using HMRC’s calculator to have supporting from budgeting for income
tax on business profits and class 2, class 4 National insurance
Moreover, if sole trader company have turnover over 85,000, sole trader
must register for VAT. The volunteer registration could be applied if
your company suitable with it.
If company working in construction industry, sole trader needs register
subcontracts and contracts with HMRC
Partnership - Setting up  LPs
+ Business owners and partners + have at least one "general
need to share responsibility for partner" and one "limited partner"
 business includes: all losses that
the business creates, invoices of
things bought for the company
+ Partnerships share business
profits, and each person must pay
their own tax corresponding to
their share.
+ A partner is not necessarily a
person (an individual) but can be a
limited company which is
considered a partner and can be a
"legal person"
- Works need to do
+ name choosing
+ "Nominated partner" choosing in
which the responsibility of
"nominated partner" is to manage
the tax returns of general partners
and the reports and documents of
the company.
+ make a registration with HMRC
(Government Digital Service,
2012)
Private company
Public company
and all general partners must pay
tax based on their profits
- Setting up
+ choose a suitable and comply
with the provisions of the business
name
+ Registered business address
(company location)
+ Appointment of limited partners
and general partner
+ make a registration with
Companies House
 LLPs
An incorporated company with at
least two of them, a member may
be a company which called
"corporate member" (Companies
House, 2014)
- Setting up
+ a company's name must be
chosen
Registered company address and
this address must be published
+ at least 2 members must be
designated
+ create an agreement of how LLP
will be run
+ Register the company in the form
of LLP with Companies House
(Companies House, 2014)

5. Management
Management Difference duties of Duties of director
director

Sole trader An unincorporated Sole trader, director According to Henri

company with 1 person and
do any works and activities
of company that means sole
trader just have only one
owner and sole trader is no
need to answer to a board
of directors or business
phải làm hết tất cả Fayol’s theory, director
các công việc và in all kind of company
trách nhiệm của need to have 5 basis
directors duties such as
+ planning: include
activities related to
planning from ideas,
 partners (Your Business,
2012)
Sole trader is not affected
much by the regulations of
the law like others type of
business. The owner of the
business receives all profits
and has unlimited liability
for the company's liability,
losses, and liabilities
(Sba.gov, 2015)
Partnership General partnership: The
general partnership
members can decide on
behalf of the partnership.
All general partners are
subject to unlimited
responsibility and joint
decision-making for the
company.
General partnership
(GP): formed with 2 or
more general partners and
they co-own the company
for profit. They are
responsible for the debts
and lawsuits as owners
Limited liability
partnership (LLPs) has
the same corporate
structure as LPs, but all
partners have the authority
to manage and make
decisions and have limited
liability for corporate’s
debt (Christopher, 2019).
And may have many
general partners. Each
member has limited
liability, which means they
are not entirely take
personal responsibility for
the business's debts but
responsible for their own
developing strategies to
achieve future round
goals (Linkedin.com,
2017)
+ organizing includes
effective labor and labor
organization activities.
director must train
employees, recruit
suitable people and
ensure the workforce for
Điều hành bởi the company to operate
general partners và regularly and effectively
general partners đều (Linkedin.com, 2017)
có nhiệm vụ thực + commanding
hiện các công việc Inspecting, monitoring,
của director and managing
employees and
operations with
inspiration to work and
communicate strategies
for employees to
achieve company goals
(Linkedin.com, 2017)
+ coordinating
Director needs to carry
out the requirements,
procedures and
activities of the
Ai có quyền điều company properly,
hành công ty harmoniously linking
the activities of the
departments
(Linkedin.com, 2017)
+ controlling
Operational control as
well as company
management. edit
inappropriate activities
and report, give ideas to
change the
shortcomings compared
with the plan
(Linkedin.com, 2017)
 behavior and taxes
(Companies House, 2014)
Limited partnership
(LPs) is formed by two or
more people and with at
least one general partner
managing the company
(who is making the only
policy) and more than one
limited partner not
participating in the
company’s activities. Both
general and limited partner
have different levels of
liability for debts that the
company cannot pay
(Companies House, 2014)
Private
company
Public
company

6. Sources of finance
Sole trader 2 main sources of fund are capital equity and capital debt. Majors rely
on own resources including saving, profits and to raise the money from
bank loans and credit card, sole trader needs putting up own money,
money which borrowed from relatives and friends, Retained Earnings
Reinvesting, Sole Proprietors Grants, Conventional loans from a bank,
Financing Credit Cards, Stock and Properties Disposal, Financing Trade
Credit (Jayne, 2019)
Partnership + Financial resources from equity capital are available from personal
savings, profits from business, money from selling assets, adding capital
from existing partners, venture capital sources from venture capitalists
with large capital to finance business activities for partnerships
+ Debt capital: Raising funds by borrowing from financial institutions
or from banks (Bizfluent, 2017). When borrowing money from a bank,
partnership must report the financial situation of the company, partners
so that the bank can agree to lend.
Private company
Public company

7. Advantages and disadvantages

Advantages Disadvantages
Sole trader + Easy to set up a company,
affordable price with simple way
to set up
must comply with less legal
requirements than other types
sole trader company has the right
to decide on internal business
activities
+ The sole trader tax liability is
simply because the company's
income is the owner's income
(The University of Manchester,
n.d.)
+ Owners of a sole trader business
do not have to pay unemployment
tax on their copy (but still pay
unemployment tax to employees)
(Entrepreneur, 2021)
Partnership
Private company
Public company
The owner of a company trading as a
sole trader must have unlimited
liability to the company, including
debts, losses, and liabilities of the
business.
+ Affected by the company's risk.
sole trader's owner is responsible for
existing debts of the company
+ Business owners can be sued by
creditors when the business is in
financial trouble (Entrepreneur,
2021)
+ capital cannot be raised by selling
interests of business
+ sole trader can hardly continue to
operate after bankruptcy