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Comparison of sole trader and private limited company

Moira Ramez operates a sole trader business selling accessories to fashion boutiques. She wants to grow the business and is thinking of reorganising the business as a private limited company and raise more financing. To increase the capital of the business, she has asked her sister Mistry Robins and her husband Ian Robins, and her friend Lina Wang to invest in the company. Mistry is working for the business and Ian is a solicitor. Mistry and Ian are willing to invest in the company$$s shares. Lina is willing to provide a $100,000$ five$-$year loan at $8\%$ interest to be paid once per year.

a$.$Explain two advantages and two disadvantages for Moira of organising the business as a corporate business entity when compared to a sole trader.

b$.$Referring to one of the private property rights mentioned in Unit $1,$ Session $1,$ Section $2\mathrm{.}3,$ explain why Mistry, as an employee, might be happy to invest in the private limited company and become a shareholder.

c$.$Explain why Lina might prefer to provide an $8\%5-$year loan to the company rather than invest in its shares.

d$.$Explain to Moira the stakeholder interests and financial statement information needs of Mistry $($as an employee$)$ and Mistry and Ian $($as shareholders$)$ and Lina $($as a long$-$term lender$).$

e$.$With reference to the five characteristics of the modern corporation set out in Unit $1$ Section $2\mathrm{.}1,$ explain to Moira how the legal characteristics of her small sized private limited company would change when her company grows and develops into a large listed public limited company.

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