● • Amin decided not to form a partnership with his uncle. Instead, five years after setting up his business, he is thinking of forming a private limited company. Amin would sell shares in his new company to friends and relatives but he wants to keep most of the shares himself. He is very busy repairing computers and fitting new computer systems for the large number of customers who appreciate Amin's IT skills and like the personal service that he offers. He wants to raise capital to pay for a bigger workshop and two new vans. He plans to employ at least two other engineers. Amin is also thinking of recruiting a manager to help him deal with customers and the accounting side of the business. Amin has been told that when he creates a private limited company his 'personal risk will be reduced but that he will still own most of the business'. 1. Explain two advantages and two disadvantages to Amin of converting his business into a private limited company. 2. Do you think that a private limited company is the appropriate form of organisation for Amin's business? Justify your answer

Answers 2

the fact that the court of law can not force Amin to give his personal possessions over to repay his debt is a win win situation also it mean that he can sell shares to shareholders so his making money that way to.


yes as he want to reduce his risk to a minimum this is a good way to do it.

AI generated Answer

Quick Answer: Advantages: Reduced personal risk, potential for raising capital; Disadvantages: Difficulty in decision making, more compliance obligations. Yes, a private limited company is an appropriate form of organisation for Amin's business as it allows him to maintain majority ownership while also protecting his personal assets. Full Explanation: Advantages: 1. Reduced Personal Risk: When forming a private limited company, the liability of the shareholders is limited to the unpaid balance of their shares. This means that Amin's personal assets would be protected from any potential losses the business may incur. 2. Potential for Raising Capital: By selling some of the shares to friends and relatives, Amin would be able to raise capital in order to finance extra costs such as a bigger workshop and two new vans or employ staff. Disadvantages: 1. Difficulty in Decision Making: As a sole trader, Amin has full control over the business decisions. However, in a private limited company, decisions are likely to be more complex and require the approval of directors and shareholders. 2. More Compliance Obligations: As a private limited company, there will be additional compliance obligations such as filing annual accounts and tax returns which could increase administrative workloads. In conclusion, a private limited company is an appropriate form of organisation for Amin's business as it allows him to maintain majority ownership while also protecting his personal assets. With some of the advantages of a private limited company, Amin could have the opportunity to further expand his business.
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