Question

John had just graduated from High School. John's father decided to retire and transfer the ownership of his shoe store to him. After operating the business for only one year, John decided to convert the business to a Private Limited Company.
(a) State TWO advantages John's father enjoyed as a Sole Trader.

(b) Explain TWO benefits John would enjoy by converting the business to a Private
Limited Company.

(c) Outline TWO ways in which the growth of the business may affect its organizational structure.

Answer 1

Answer:

Explanation:

Sole trader is a form of business owned and controlled by an individual

Advantages that John's father enjoy

1) All profit of the business belongs to him.

2)He also have full control over his business.

Private limited company is a form of private business entity with liabilities of owners limited to their shares. Membership is from 2 to 50

Advantages that John will enjoy for converting to private limited liability

1) Liability will be limited to his shares making his personal properties save

2)The company now exist as a real legal entity . Its existence is acknowledged by the government as registered

Change in organizational structure

1) Membership will be by shares

2) Board of directors has to be in place in compliance with the Sarbanes - Oxley acts