A sole trader decides to convert the business into a private limited company. Which of the following is a likely benefit of this change?

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Question

A sole trader decides to convert the business into a private limited company. Which of the following is a likely benefit of this change?

Accepted Answer

The owners benefit from limited liability, protecting personal assets — Converting to a private limited company gives owners limited liability, meaning their personal assets are protected if the business fails. Option A describes unlimited liability, which applies to sole traders, not limited companies. Option B describes a public limited company (plc), not a private limited company. Option D is incorrect because limited companies face more regulation and legal requirements than sole traders.

Answer

The business will face less government regulation and paperwork

Answer

The owner will have unlimited liability for all business debts

Answer

Shares can be freely sold on a stock exchange to the public

Answer

The owners benefit from limited liability, protecting personal assets

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