I would invite my friend to coffee and explain to him the situation if he wants to expand on financial sources available and the legal/financial documentation he has a duty to provide.
If he wants to expand as a sole trader or partnership, there are a variety of choices for his business as follow. Personal Savings: This is the cash my friend has ready. It is a quick and easy source of funding for him. He can choose if he wants to retain his savings or use them to purchase tools, cars, gears or other equipment his business 's requires. Retained Profits: If my friend picks to retain the profit for his business, this source of finance is named retained profit and he can make good use of it to expand. Working Capital: My friend has to subtract his current liabilities he has plus how much he owes from current assets he possesses and the money his business is owed. He can utilize this as working capital to pay for temporary finance essentials. Sale of Assets: I would inform my friend that he can always get rid of some of his properties like selling equipment, land, office blocks, and utensils. I will also warn him that this is just a temporary solution since these assets are needed for his business to grow. Bank Loans: As a sole trader or partnership, he can get a loan but since in these two ways of expansion he will have unlimited liability, getting a loan for his business will render him accountable for repayment even if he becomes broke.
If he decides to go on as a limited company with family and friends he will have the following available. Short Term/Internal Sources: Personal savings, loans, and grants from family and friends are an option. He must know in this kind of company, when his bu...
... middle of paper ...
...If a shareholder obtains minimum three per cent of his company 's voting share capital, that person has to unveil this information. Transactions: If my friend ever becomes a premium listed company, he must get shareholder endorsement before conducting an acquisition or disposal especially for considerable transactions. Director dealings in shares: all managers who deal in my friend’s business 's shares must unveil this material to the business and inform the market.
All said and done, since my friend’s business is still young and risks out there are so great, especially financial and legal ones, I would advise him to take the route that has less dangerous. Continuing as a sole trader until more potential is realized. This will give my friend not many sources of finance but with less vulnerability. If the sole trader proves well, limited company is next step.
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