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A young entrepreneur, Sarah, runs a small cake shop as a sole trader using Instagram. Her business is doing very well, and she wants to expand by opening a physical store, hiring staff, and selling nationwide.

She is unsure whether to stay as a sole trader or convert her business into a Private Limited Company (Ltd).

❓❓❓ Problem to Solve:

“Should Sarah continue as a sole trader or convert her business into a Private Limited Company? "

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One thing I learned today.

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A small or medium-sized business

Shareholders invest capital by purchasing shares

Each year shareholders receive profit called DIVIDEND.

Board of directors runs operations

Limited liability protection

Separate legal identity

Feel free to ask your questions by adding your comments below.

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Differences between LIMITED and UNLIMITED Liability?

Limited liability: Owners/shareholders only lose the money they put into shares.

Unlimited liability (e.g. sole trader/partnership): If the business fails, the owner must pay debts with their personal money or savings. (Risk is unlimited)

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"Imagine a small tech startup “Techie Ltd” started by 5 friends. Each friend invests $1,000 by buying shares. The company borrows $50,000 from the Bank to expand. Unfortunately, the company fails and cannot pay the debt. Because it’s a Private Limited Company, how much do EACH OF THEM personally lose?”

Write your answer below.

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You can watch this video at home during your free time and after watching the video please write your comment or if you have any questions feel free to comment below.

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Consider the advantages and disadvantages of being a sole trader? - (Hakeem, Najib & Aden)

You can search using Google.

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Consider the advantages and disadvantages of Private Limited Company? (Safwan, Mateen & Zachery)

You can search using Google.

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"How does limited liability affect Sarah’s decision? "

Think about who would be responsible to pay the business debts if she stays as a sole trader or converting to Private Limited Company. (Akif, Mubin, Mizan & Zaim)

You can search using Google.

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One question I still have

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“If you were Sarah, would you stay as a Sole Trader or convert to Private Ltd? Why?”