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Business Studies · May / June 2023 · Paper 22 · Question 1

0450

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  • 1(a)[8]

    Explain four characteristics needed for an entrepreneur to be successful. Award 1 mark for each relevant characteristic (max 4). Award a maximum of one additional mark for each explanation of a characteristic of being a successful entrepreneur. There are no application marks available. Relevant characteristics might include:

    Self-confident – strong belief in their own ability and ideas
    Creative – find new and different ways to attract customers
    Independent – willing to go with own ideas
    Hard worker/dedicated – prepared to work long hours
    Risk-taker – willing to risk losing own capital/as a sole trader or partnership willing to risk losing personal assets
    Effective communicator – able to persuade others
    Optimistic – think positively about new ventures and continue if there are setbacks
    Innovative – able to develop new products to retain customers
    Good at networking – prepared to learn from others
    Self-motivated/Determined/Passionate/Driven
    Results driven
    Strong leadership qualities
    Resilience
    Experience/Knowledge/Multi-skilled For example: Self-confident (1)

    as the entrepreneur has a strong belief in their own ability and ideas to convince others such as banks to lend to them (1)

  • 1(b)[12]

    Consider the advantages and disadvantages of starting up ET as either an unincorporated business or as a limited company. Which should Zane and Zaara choose? Justify your answer. Level Description Sound application of knowledge and understanding of relevant business concepts using appropriate terminology. Detailed discussion of both options. Well-justified recommendation. Candidates discussing both options in detail, in context and with a well-justified conclusion including why the alternative option was rejected should be rewarded with the top marks in the band. 9–12 Sound application of knowledge and understanding of relevant business concepts using appropriate terminology. Detailed discussion of at least one option. Judgement with some justification / some evaluation of choices made. Candidates discussing at least one option in detail and applying it to the case should be rewarded with the top marks in the band. 5–8 Limited application of knowledge and understanding of relevant business concepts. Limited ability to discuss the options with little/no explanation. Simple judgement with limited justification / limited evaluation of choice made. Candidates outlining both options in context should be rewarded with the top marks in the band. 1–4 No creditable response. Relevant points might include: Advantages Disadvantages Unincorporated business

    Partners are in complete control of the business
    Do not have to share profits with shareholders – may lead to higher profits each if shared between fewer owners
    Easy to set up the theatre and will have few legal requirements to operate the business – reducing effort and cost to set up
    Unlimited liability – could lose all personal possessions
    Limited sources of capital – if only 2 partners invest in the business as limited to their own capital
    Partners are responsible for all decisions taken by either partner if mistakes are made – may lead to personal financial losses and may be equally liable Limited company
    Limited liability – owners personal possessions will not be used to pay business debts
    Owners and business are separate legal identities – provides continuity on the death of owners
    Can sell shares to raise capital to set- up the theatre – to family and friends – large amounts of capital may be raised
    Accounts are not private – competing theatres may access the accounts
    Not easy to transfer shares as a private limited company – may make it difficult to sell shares to family and friends
    Legal formalities to set up – may take more time and cost than a partnership
    Legal formalities to operate the company – needs to have accounts audited and registered with the government takes time and increases costs Recommendation Justification may include:
    ET should be an unincorporated business because it is easy to set up the partnership. Zane and Zaara will have complete control of the theatre and keep all the profits. There are not the legal formalities with a partnership that will increase costs that there are if ET was a private limited company.
    ET should be a limited company to gain the benefits of limited liability. If anything goes wrong with the theatre, then any liability will only be for an amount invested in the business, all Zane and Zaara's personal belongings will be safe.
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