1. A sole trader may form a limited company in order to obtain financing to expand the business, as it is difficult for sole traders to secure bank loans. 2. A partnership looking to expand may become a limited company when new owners join, through the process of incorporation. Limited companies are owned by family and friends as shareholders. 3. Only a public limited company can raise capital by selling shares to the public on the stock exchange. The major benefit of a limited company or PLC is limited liability, where shareholders only risk losing their investment if the business fails.

1. 4-150129085736-conversion-gate02 H BM Business Enterprise
1. A sole trader may become a ___________________________ in order to
obtain enough new finance to expand his business. It is more difficult for a
sole trader to secure bank loans therefore lack of finance can be a problem.
2. A partnership which is looking to expand may decide to become a __________________
_____________________________________________ when new owners join the
business - called _______________________________________ . In a Ltd company the
shareholders are family and friends.
3. Only a ____________________________________________________ can raise capital by selling
shares to the general public on the Stock Exchange. The major benefit of becoming either a
Ltd or PLC is ____________________________________________ i.e. shareholders only
stand to lose the value of their investment should the business fail (and not their personal
belongings/savings which could happen to a partnership/sole trader who gets in debt).
4. These shareholders who invest their money to buy shares in a company will receive financial
rewards from the company (if it makes _____________________) in the form of
_______________________.
5. If the company only makes a little profit, ______________________________ shareholders
may not receive any dividend at all. This is because ____________________________
shareholders have the right to receive any dividends first. However because of this greater
___________, ordinary shareholders can expect higher dividends if the company is very profitable.
6. ______________________________________ holders are individuals who loan money to a
business. The loan agreement states how much interest they are due from the business before any
dividends to ordinary and preference shareholders are paid. At an agreed date, these debentures are
_____________________________ in full. Only __________________________________________
_______________________________ can raise extra capital from issuing debentures.