Why would business change over time?

Answer 1

Sole Trader-

Why might a business change its ownership over time?

One reason that a Sole Trader might decide to change their ownership into a Partnership is that the Sole Trader might be struggiling from lack of skills with the business. They might want to invite someone into the business with different skills to help run their business.

Another reason for a Sole Trader to change their ownship might be that they want someone to join them to share responsibilites, ideas and the heavy work load that a Sole Trader has as this would mean a lot less stress for them.

Also, the sole trader might want to pair up and become a Partnership as a way to raise their capital from the other person.

Reasons for a Sole Trader, wanting to change into a Private Limited Company might be that they want to bring a large verity of different skills into the business.

Another reason might be that all the shares sold would reasice capital, being a great advantage for the company as it will mean they would have the ability to expand their business, product, service ect.

How may liability change?

If a sole trader became a Private Limited Comapny, their liability would change to Limited Liability. Limited Liability is a legal term which means if the business fails over a certain amount of time, share holders can only loose the amount of money that they have invested in the business, meaning their personal assets will not be at risk.

However, if the Sole Trader because a partnership, their liabilty would stame the same, as both Sole Trader and Partnership ownerships have the same liability.

How does changing the ownership help the business grow?

If a Sole Trader became a Partnership, it could help the business grow in quite a few ways. As their would be a another person running the business with them, it would bring other sets of important skills into the business.

It would also mean that it would be a great chance to share responsabilites and ideas together, helping the business in the ways that could improve it in many different ways.

As well as that, changing into a Partnership will mean that it would raise capital from the other person, bringing more money into the business again, for things such as expanding, new products and improvment on service.

Changing into a Private Limited Company could help the business grow in many ways. Again, it would bring a variety of different skills and ideas into the business, helping it grow quickly.

Also the shares sold would raise capital, which would be a great advantage as it would mean the business would have a great chance to for the business to expand their busienss, product, service ect- Meaning the business would grow rapidly.

How does changing ownership make it easier to get funding from banks?

If the Sole Trader changed its ownership into a Partnership, the banks are more likely to lend the business money than if it was a Sole Trader ownership. The bank would be more willing to lend money to a business owned and runned by more than one person. As a Partnership can have from 2-20 people in the business, all with Limited Liability, the bank would not have to worry as much about getting their money back, as there would be more than one persons assets against their loan.

Although the bank would be more likely to fund a Private Limited Company than a Sole Trader, they may still find it hard depending on the size and running of the business.

If they changed their ownership to a Pubilc Ltd, the bank would most likely be reasonable when it comes to funding them as a business that's shares are sole publicly, as it would be less likely to fail.

How does changing ownership affect their competition?

If a Sole Trader changed into a partnership, it would automaticly add an edge over the competition, as more people would bring new ideas and skills, improving the business and making more money.

If a Sole Trader changed into a Private Limited Company, all the shares sold would raise capital, giving the company ability to expand, product and service- the affect of this would add a huge affect to the compeition.

Partnership-

Why might a business change its ownership over time?

A partnership may have to change into a Sole Trader if some has died or left within the business. This will mean that the remaining person would have to buy out their shares in the business.

If a partnership changed into a Private Limited Company, it could be because they want expand their business. To do this, they would have to sell shares to friends or famlys to become this type of business. Changing their ownership would be a great advantage and new start for their business as it would mean that they would have limited liability.

How may liability change?

If a partnership changed into a Sole Trader, their liabilty would stay the same - unlimited liablity.

However, if a partnership changd into a ownership to Private Limited Company, their liability would change so they would have Unlimited Liability, which is a great advantage as it would mean they would only be able to loose what they've put in the business.

How may changing ownership help the business grow?

If a Partnership is forced to change into a Sole Trader because eiter someone has died of left the business, it wouldn't necessarily help the business grow, however it would mean that there would be a sudden gain of control within the business, making it easier to communicate and work with other people.

If a Partnership changed their ownership into a Private Limited Company, it would mean that they would have Limited Liability. This could possibly mean that it could help the business in the way that the share holders would be more willing to invest their money into the business, for room for improvement.

As well as the advantage of having Limited Liability, changing into a Private Limited Company would mean that a wider range of ideas and skills would be introduced from the new share holders. Shares have to be brought, so whatever money given in return for the shares, would be put into the business.

How does changing ownership make it easier to get funding from banks?

Changing into a Sole Trader, might not make it any easier to get funding from banks. It would all depend on the size of the business.

If a Partnership changed into a Private Limited Company, it is more than likely that it will become easier for them to get funding from banks. This is because banks are more willing to fund bigger companies.

How does changing ownership affect their competition?

Changing ownership from a partnership into a Private Limited Company, would introduce a wide range of new skills and ideas into a business. This will mean competition would be greater, as the business would eventually improve. As the shares would be sole sold capital, this would give the company the ability to expand and grown, effecting and putting an edge on their competiton.