Hana's Bakery has grown from one market stall to three shops. Hana plans to form a private limited company. Four relatives will each buy 150 shares at £20 p...
Question 1 Report
Hana's Bakery has grown from one market stall to three shops. Hana plans to form a private limited company. Four relatives will each buy 150 shares at £20 per share. The company will use the money for ovens, advertising and stock, but the shares will not be offered to the general public.
(a) Identify the legal form Hana plans to use. [1]
(b) Calculate the total share capital raised from the four relatives. Show your working. [2]
(c) State two features of a private limited company. [2]
(d) Explain one benefit to Hana of using share capital rather than taking the full amount as a bank loan. [2]
(e) Give two documents or records the company should keep to show how it is managed. [2]
Answer Details
(a) Hana plans to form a private limited company, or Ltd [1].
(b) The total number of shares is:
\[4\times150=600\text{ shares}\]
\[600\times\pounds20=\pounds12\,000\]
Total share capital is £12 000 [2].
(c) Two features are that a private limited company is owned by shareholders [1] and its shares are not offered to the general public [1]. Shareholders have limited liability and the company has separate legal identity.
(d) Share capital does not normally require fixed loan repayments or interest payments [1]. This means more cash can remain available for stock, wages and other business costs [1].
(e) Two suitable records are company accounts [1] and a register of shareholders [1]. A record of directors, minutes of meetings and an annual report are also acceptable.
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