NAME: SIMREN DAVI

CLASS: LOWER 6
SUBJECT: MOB
TOPIC: AS A BUSINESS CONSULTANT YOU ARE REQUIRED TO MAKE A
PRESENTATION TO A PARTNERSHIP, ALPHABETS AND NUMBERS ON 5 MAJOR
DIFFERNECES BETWEEN A SOLE TRADER AND A PRIVATE LIMITED COMPANY.
(15 MKS)

Five major differences between a sole trader and a private limited company are:
1) Private limited companies have greater borrowing potential. Current assets are used as
security by creating a floating charge (A floating charge is a security interest over a fund
of changing assets of a company or a limited liability partnership, which 'floats' or
'hovers' until the point at which it is converted into a fixed charge, at which point the
charge attaches to specific assets of the company). Whereas sole traders are unrestricted
in the amount and purpose of borrowings but cannot create floating charges.
2) Private limited companies are incorporated and do not guarantee reliability or
respectability but give the impression of a soundly based organisation. There may be
prestige attached to a directorship. Whereas a sole trader is and unincorporated business
and does not carry the same prestige.
3) In a private limited company losses can be carried forward to the next year to set against
future profits whereas in a sole trader business losses generated by a sole trader can be set
against other income of the year or carried back to prior years.
4) Private limited companies can raise capital easily as compared to a sole trader who might
have to use personal possessions as collateral
5) Sole traders have unlimited liability meaning that they(the owner) is responsible for all
debts whereas in a private limited company there is limited liability meaning that the
shareholders risk their investment only