An online business selling bicycle repair kits has received orders from customers in neighbouring countries. The sole trader is considering changing the bus...
Question 1 Report
An online business selling bicycle repair kits has received orders from customers in neighbouring countries. The sole trader is considering changing the business structure to a private limited company before expanding overseas. This would allow the business to sell shares to selected investors.
(a) Identify the business structure the owner is considering. [1]
(b) Explain one benefit of changing from a sole trader to this business structure. [2]
(c) Explain one possible disadvantage for the owner of changing the business structure. [3]
Answer Details
(a) The owner is considering becoming a private limited company. [1]
(b) A private limited company can sell shares to selected private investors. This can raise finance for overseas expansion, such as paying for marketing, stock or delivery arrangements in new countries. [2]
(c) A possible disadvantage is that the original owner may lose some control. Shareholders can influence important decisions, so decisions about products or overseas expansion may be slower and the owner may not be able to run the business entirely as they prefer. [3]
Download The App On Google Playstore
Everything you need to excel in your exams
