IGCSE /AS Business Students can answer the 8 Marks Analysis question with the given possible structure. The current question states the Advantages of business as private limited company. Please note, the answer is just a sample and may not be used as a standard but is shared for generation of idea only. The following question is referred from 0450_s21_in_22 and 0450_s21_qp_22 (Answer to the questions).
Explain two advantages of setting up a business as a private limited company. [8]
Advantage 1:
Limited Liability; where the personal assets are not at stake, in case of business loss. [Kn]
Explanation:
TT will be able to get shareholders easily since they will be only liable to the amount they have invested, thus making it easier for TT to increase its capital and further finance its expansion. [An] This might not be possible for unincorporated businesses like sole and partnership. Plus, we won’t have to pay interest on these financing options. [An+] Rather than relying on $40,000 loan from family, he should better try to kick off his sales as soon as possible which will help him attracting new investors, thus paying back such loans easily. [App]
Advantage 2:
Brand Credibility; private limited companies enjoys better credibility in sense of Brand ethics. [Kn]
Explanation:
As the private limited company has to publish its financials every year to the stake holders, it is normally a well calculated and ethical business as its credibility can be at stake in case of any financial /ethical issues. [An] This will help TT to develop its trust and brand image in eyes of the customers. In case of selling branded toys to high earning consumers [app], it would be easier in case of a credible business. [An+]
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Important points to remember:
While attempting Paper 2 Style Questions or the questions with Case Study as a background, there is a requirement to “Apply” the analysis according to the given scenario of the question. For example in this question Advantages of business as private limited, you can see both styles of [App] in explanation, one give at the end and another given during the analysis. You are free to use any style as far as application is there.
