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Finance & Accounting
Pages 3 (753 words)
THE OZZIE CAKE COMPANY The advantages of changing a company organization from a sole trader to a limited liability company are that the company becomes a separate legal entity and the shareholders are not personally liable to pay of the company’s debt. In a sole trader organization the owners are exposed to unlimited liability and if the company defaults on its loan repayments then owners are personally liable to pay the debt.
The disadvantage of the changing an organization from sole trader to a limited liability is that it is more expensive to create compare to a partnership or sole proprietorship. Renewal fees for a Limited Liability Company are high which leads to a rise the costs of the company which may have a negative effect on the future cash flows of the company and the company might face losses due to such costs. Another disadvantage of a LLC is that its paperwork is more complex than of a sole trader or a partnership. The advantage of changing a company organization from a sole trader to a partnership is that it helps in raising more finance for the company. Partnership not only helps in raising more capital but partners are also able to bring in variety of individual skills which helps in taking the organization forward. In case of a sole trader, the entire burden is one or two individuals, but in the case of partnership the burden is distributed and the partners are better able to concentrate on their areas of specialization. The disadvantage of changing a company organization from a sole trader to a partnership is that the profit has to be distributed among the partners. It becomes a problem when deciding how to value each individual’s skills and time. ...
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