Paper 2 · investment appraisal, business ownership
Emma and Kero currently run E & K Fisheries as a partnership but are considering incorporating it as a private limited company to raise the $300,000 needed for a new branch. Which of the following is a genuine benefit they would gain from incorporating?
AThe owners would no longer need to keep any financial accounting records for the business at all.
BEvery partner would automatically retain an equal and unquestioned say in all major decisions.
CThe owners' personal assets are protected from the company's debts through limited liability.
DThe company would be completely excused from paying any tax on the profits it earns each year.
Explanation: Incorporation creates a company as a legal entity separate from its owners, so shareholders are only liable for the amount they invested (limited liability) and their personal assets are protected if the business fails. Companies still keep accounting records, control may become diluted among shareholders, and the company remains liable for tax.
Derived from ZIMSEC Business_studies Paper 2, November 2018, Q1
