Analysis will come from developing the issues
Answers could include:
Advantages
• Amir would gain limited liability, which would mean that his potential loss from the
business would be limited to the amount that he has invested, not his personal
possessions and wealth (e.g. his house).
• BH would gain its own legal personality, which would mean that if BH was taken to court
(e.g. for selling poor/contaminated products) then the business would be sued not Amir.
• BH would gain continuity, which would mean that Amir's son could inherit the business
on Amir's death.
• BH could potentially take on more investors by selling shares which would increase the
sources of finance open to BH and could fund the potential expansion into Oriental food.
Disadvantages
• There will be some legal formalities and paper work involved in becoming a private
limited company which will be an additional cost to the business that Amir must fund.
• End of year accounts must be made available for public inspection, which could lead to
competitors gaining information about BH which Amir would not want to be known. This
is especially important in such a competitive market.
• Staff may feel that the business is becoming larger and may worry that they could lose
their personal relationship with Amir.
• If Amir takes on further investors as shareholders of the business, then this may lead to
a loss of control and less profit for him.