Case Study: From Street Stall to a Limited Company
Amina runs a small fruit juice stall outside her school. She started the business with her own savings
and makes all the decisions herself. If the business makes a loss, Amina must pay the debts using her
own money. This type of business is called a sole trader, which is an unincorporated business.
After two years, the stall becomes very popular. Amina wants to expand and open a small juice café.
She needs more money to do this, so her uncle and friend agree to invest in the business. They
decide to register the business as FreshSip Ltd, making it a limited company.
Amina notices that although she now shares ownership, the risk to her personal money is much
lower than before.
Questions
1. Identify two differences between Amina’s original sole trader business and FreshSip Ltd. [2]
2. Explain what is meant by limited liability and how it reduces risk for Amina and the other
investors. [3]
3. Explain how ownership and risk changed when the business became a limited company.
[4]
Case Study: From Street Stall to a Limited Company
Amina runs a small fruit juice stall outside her school. She started the business with her own
savings and makes all the decisions herself. If the business makes a loss, Amina must pay the debts
using her own money. This type of business is called a sole trader, which is an unincorporated
business.
After two years, the stall becomes very popular. Amina wants to expand and open a small juice
café. She needs more money to do this, so her uncle and friend agree to invest in the business.
They decide to register the business as FreshSip Ltd, making it a limited company.
Amina notices that although she now shares ownership, the risk to her personal money is much
lower than before.
Questions
1.
Identify two differences between Amina’s original sole trader business and FreshSip Ltd. [2]
2.
Explain what is meant by limited liability and how it reduces risk for Amina and the other
investors.
[3]
3.
Explain how ownership and risk changed when the business became a limited company. [4]