Which two of the following are reasons why a sole trader would become a private limited company?
Select two answers - Edexcel - GCSE Business - Question 2 - 2018 - Paper 1
Question 2
Which two of the following are reasons why a sole trader would become a private limited company?
Select two answers.
A) The business will have unlimited liab... show full transcript
Worked Solution & Example Answer:Which two of the following are reasons why a sole trader would become a private limited company?
Select two answers - Edexcel - GCSE Business - Question 2 - 2018 - Paper 1
Step 1
B) The risk of losing personal assets is reduced
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Answer
One major reason a sole trader might change to a private limited company is the reduction of personal liability. As a sole trader, personal assets are at risk in the event of business failure, while a private limited company structure protects personal assets.
Step 2
E) Increased ability to raise finance
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Answer
Another reason for converting to a private limited company is the increased ability to raise finance. A private limited company can attract investors by offering shares, thus providing more options for funding compared to a sole trader.
