1.

Explain one difference between private-sector and

public-sector organisations.(3)
[K]
Private sector–owned by private individuals and groups;
Public sector–government-owned and -controlled.

2.Explain one difference between a sole trader and a

private limited company. (3)
[K]
Sole trader has unlimited liability but the owners of a
limited company (shareholders) have limited liability.

7.Explain one way in which limited liability makes it

easier for companies to raise finance.(3)
[K]
By reducing the risk of investment, it makes ownership
more attractive and therefore increases
the ability of a business to raise finance. Shareholder
liability is limited to the amount invested in buying
shares.

11. Analyse one difference between private limited

companies and public limited companies. (5)
[K]
Private limited company (ltd.) – shares cannot be sold to
the public and are not listed on a stock market so there
is much less potential to raise large sums of finance from
selling shares.
A public limited company (plc) can issue more shares at
any time. Therefore, a plc has greater access to finance
but there is a greater risk of takeover.
Consider the benefits of different forms of business structure
with reference to information provided in the case.

The business structure I would recommend for Salman’s

business is private limited company(ltd.), which is a business
that is owned by shareholder who are often members of the
same family.[K]

As a sole trader, Salman can retain complete control of the

garage and keep all of the profits. However, this form of
business structure makes him difficult to raise additional capital
as he is the only person provides the permanent finance. In
addition, a sole trader business is lack of continuity which
means the business will end when the owner dies. Since
Salman want to expand the business and to pass it on to his
children, this form of business ownership is not suitable for his
business.

Partnership with sons and daughter could be appropriate in

achieving his goal to involve his children in the business. It
could also be a source of finance if his children have savings to
invest. However, investment exposes them to the risk of
unlimited liability, which means all of their personal
possessions and property can be taken to pay off the debts if
the business fails. Expansion may expose Salman to greater risk
due to the increased level of finance required within the
business. This contradicts his unwillingness to take risks.

If Salmon forms a private limited company, he is still able to

retain the control of the business compared to converting the
business into a public limited company(plc). He can remain in
complete control by being the only shareholder or he could
offer shares to his children. Incorporation provides the major
benefit of limited liability, which means the only potential loss
is the amount invested in the company. What is more, there is
not risk of takeover by other firms because a private limited
company cannot sell share to the general public.

In conclusion, Salman’s decision will be influenced by his

attitude to risk, desire to retain control and the amount of
finance needed to expand the business. Although a private
limited company cannot raise substantial capital from public
issues of shares, it would still be considered as the most
suitable form if the business wants to expand.

in favor of:
1. lack of business experience--less chance of business fail
2. staff training
3. PD could not open another branch within 5km
4. established business

against:
1. one-off payment $100000
2. materials are restricted
3. pay a percentage of turnover