Explain one financial reason why Leo Scott Smith decided to establish Tended Ltd as a private limited company - Edexcel - A-Level Business - Question 1 - 2022 - Paper 2
Question 1
Explain one financial reason why Leo Scott Smith decided to establish Tended Ltd as a private limited company.
Tended Ltd has constructed the decision tree below to... show full transcript
Worked Solution & Example Answer:Explain one financial reason why Leo Scott Smith decided to establish Tended Ltd as a private limited company - Edexcel - A-Level Business - Question 1 - 2022 - Paper 2
Step 1
Financial reason for establishing Tended Ltd as a private limited company
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Answer
One financial reason why Leo Scott Smith decided to establish Tended Ltd as a private limited company is the benefit of limited liability. By setting up as a private limited company, Leo Scott Smith ensures that the company's debts are separate from his personal finances. This means that, in the event of financial difficulties, his personal assets are protected, reducing the risk he faces as a business owner.
Step 2
Application of Tended Ltd's business model
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Answer
Tended Ltd is a small, young and rapidly expanding business that aims to innovate within the wearable technology market. This growth makes it crucial to secure financial backing without risking personal finances.
Step 3
Analysis of the decision to go private
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Answer
Creating a private limited company allows Tended Ltd to raise finance by selling shares privately, making it easier to access the necessary capital to develop the business and grow within its competitive sector.
