ENTREPRENEURIAL FINANCE
SOURCES OF FUNDING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Which two of the following are drawbacks to a sole trader of becoming a private limited company in order to raise finance for expansion? Select two answers:
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Interest will need to be paid on the amount raised
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The process to change the type of ownership is time consuming
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Less control over the decisions made within the business
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The amount generated will need to be repaid
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A dividend must always be paid each year to the shareholders
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Explanation:
Detailed explanation-1: -Disadvantages of converting a sole proprietorship to limited liability company are: Decision making process will take longer in limited liability company since there are many stakeholders who are involved and must be consulted in making every decision.
Detailed explanation-2: -The biggest disadvantage of a sole proprietorship is that this business structure comes with no protection for the business’s owner against business-incurred liabilities, such as overwhelming business debt or being sued.
There is 1 question to complete.