Sole Proprietorship - Setting up a business

Scenario

Sheryn works in a large organisation as a ‘recycling officer’. She works morning and evening shifts and has
a hectic schedule in between looking after her family.

Just recently she has felt that she has been neglecting her children and is becoming a stranger to her husband.
Although money is not a very important issue, she feels that she would still like to work and provide extra
income for holidays and other luxuries.

Whilst watching a programme on television, she has been inspired to give up her job as a ‘recycling officer’
and set up a business of her own in the world of desserts. This would involve producing an original high-
quality home-made ice-cream. She would sell this ice-cream from her own ice-cream parlour in her
hometown.

She has discussed it with her family and has decided to go ahead. She has been told that she will need a
minimum of $8,000 to start up as a sole trader.

a) Suggest three ways in which Sheryn could raise the money to start her business. ( 3 marks)

Three ways in which Shreyn could raise the money to start her money are her personal savings,
funds from her family and friends and bank loans.
b) With the $8,000, what would Sheryn have to spend her money on?Give three reasons
(3 marks)
With the $8,000, Sheryn would have to spend her money on the machinery, the parlour and
resources like the materials for the ice cream parlour, i.e cones, cups, ice cream, scooper etc. She
would have to spend her money on the parlour to start the business as she would be needing a
place to start her start up. Second, she would spend her money on machinery like the ice cream
scooper and ice cream freezer and more to add stuff to her parlour and make in functionable.
Lastly, resources and materials like ice cream, cones and cups and etc to start selling it to her
customers.
c) After the debts have been paid off, who would Sheryn have to split the profits with? (2 marks)
After the debts have been paid off, Sheryn would not have to split the profits with anyone, she can
keep the profits to herself as her business organization is a sole proprietorship.
d) If things went wrong, who would be responsible for the debts? (2 marks)
If things went wrong, Shreyn would be responsible for the debts because Shreyn is a sole trader
and she would be responsible for all the debts and the profits/
e) What could happen to Sheryn’s business if she became ill or was unable to work for a long
period of time? (3 marks)
If Shreyn became ill or was unable to work for a long period of time, Shreyn’s business could be
dead or it could go to the person she had written in the will or it could go to the government.
f) What could Sheryn do to ensure that she would not lose profits? (2 marks)