Photo AI
Explain one financial reason why Leo Scott Smith decided to establish Tended Ltd as a private limited company - Edexcel - A-Level Business - Question 1 - 2022 - Paper 2
Question 1
Explain one financial reason why Leo Scott Smith decided to establish Tended Ltd as a private limited company. Tended Ltd has constructed the decision tree below to... show full transcript
Worked Solution & Example Answer:Explain one financial reason why Leo Scott Smith decided to establish Tended Ltd as a private limited company - Edexcel - A-Level Business - Question 1 - 2022 - Paper 2
Step 1
Define financial reason for establishing Tended Ltd
Answer
One financial reason for establishing Tended Ltd as a private limited company could be the advantage of limited liability. This means that shareholders, such as Leo Scott Smith, are only liable for the company's debts up to the amount they invested. In the event of financial difficulties, their personal assets are protected, making it less risky for potential investors.
Step 2
Explain the application of being a private limited company
Answer
Tended Ltd is a small, young, and rapidly expanding business. By being a private limited company, it can raise funds more easily by selling shares. This is particularly important as Tended Ltd needs to develop its personal safety device, the 'Tended Protect', and expand further in the competitive wearable technology market.
Step 3
Analyze why this structure benefits Tended Ltd
Answer
The structure of a private limited company allows Tended Ltd to raise finance privately, which is essential for its growth and development. Limited liability not only safeguards the shareholders but also encourages more investors to support the company, knowing their financial risk is minimized.