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Advantages And Disadvantages For Josh And Luke For Sole Trader

Decent Essays
Question 1:
(1) The main advantages & disadvantages for Josh and Luke for Sole Trader are as follows:
Advantages:
• Private information:
All the information, figures and books are kept private.
• Control:
A sole trader is fully owner and controller of the business.
• Profit:
All the profits are collected by Sole trader.
• Decision:
A sole trader can take decisions for himself alone.

Disadvantages:
• Liability:
If the business is in debt, all the liability is on the sole trader.
• Decision:
Decision taken by sole trader whether they tend to be Success or Failure will be on one person. • Finance:
Raising the fund or investing into business is usually hard for a single operator.
• Employees:
Getting employees of high calibre is difficult.
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• Keeping records of everything is increased in Pty. Ltd.
• Australian securities and investment commission and Corporation Act Pty. Ltd. must follow a lot of rules and regulations.

(3) The main advantages & disadvantages for Josh Luke Ltd. are as follows:
Advantages:
• Separate Entity:
Under Ltd. companies are solely separate legal entity from the respected owners.
• Advantages of Tax:
21% of tax rate applies only to the profits of a company.
• Control:
In Limited companies, directors are also the shareholders so decision taking power are with them, taking control over things is easy.
• Shareholder Employees:
In some of the scenarios shares of the company can be purchased by the employees and they can also become shareholders.

Disadvantages:
• Accounts:
Keeping records and accounts in a Limited company is much more complex than the sole trader.
• Capital Raising:
There is restriction on raising the capital by selling share of the company in Limited company.
• Dilution:
Due to maximum number of shareholders and directors, power of decision making is distributed which usually cause disputes which can lead to dilution of the
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Section 161(1) states that proprietary company limited by shares can only change to:
• unlimited proprietary company
• unlimited public company
• public company limited by shares

Hence, Josh Luke Pty Ltd can be converted to Josh Luke Ltd. Step 2: Procedure of Changing Company type: Company Resolutions
A company must pass a resolution , resolutions are designed as all company members taking decisions. Corporations Act 2001, signifies that there are two types of resolutions that are ordinary and special.

To change a proprietary limited to a limited company, resolutions must be passed. To pass a resolution a company’s must follow these steps:
• Over a meeting in which minimum member of company must be present.
• In a month period the resolution is put into company’s records.
• The chair of the meeting must sign the minutes of the meeting.
Josh Luke Pty Ltd must pass the Special Resolution, to change the company to Josh Luke Ltd.
To change the company type, winding up the company or to change the company name, companies are obligatory to special resolution. Special resolution is only passed when more than 75% of the members votes to pass the
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