Shikha is a sole proprietor. Over the past decade, her business has grown from operating a neighbourhood corner shop selling accessories such as artificial jewellery, bags, hair clips, and nail polish to a retail chain with three branches in the city. She looks after the varied functions in all the branches, but now she wants to change her form of business as she also has plans to open branches countrywide. She is also planning to collect the funds by issue of shares. On the basis of the given information about Shikha, answer the following questions (a) Which form of business is suitable for Shikha for the expansion of business? Also mention any two benefits of that form of business. (b) Explain two benefits of remaining a sole proprietor.
Answers
Answer:
Two benefits of remaining a sole proprietor : <br> (i) She is the sole recipient of all the profits . <br> (ii) She will have the exclusive control over her business . All the decision can be made by herself without consulting others . <br> (b) Two benefits of converting to a joint stock company . <br> (i) Her business can mobilise large amount of financial resources from the public as well as through loans from banks and financial institutions . Thus , there will be greater scope for growth and expansion . <br> (ii) Her liabililty will be limited to the face value of the shares held by her . She will not be personally liable . This will reduce the degree of risk borne by her . <br> (c) If she takes decision to go nationwide , she will have to operate on large scale . In such a case , company organisation is the best choice .