With the type of business already in mind it is important to sit down and assess a number of factors that will facilitate the start of the business sustain it and eventually lead to the full growth of the business with profits.
Amongst the most important factors that we need to consider before setting up the business will include the amount of capital available, the size of the business and market availability of the products we shall be dealing with. The form of ownership will also be put into consideration before venturing into the process.
Sole proprietor is a business owned by one person.In this form of business there is no profit sharing and the owner is responsible for all the problems facing the premises. Some of the advantages of this type of business are cheap set up cost since the owner is in charge of everything and he/she can make any changes as she wishes, no operating costs like labor are required, no corporation tax is required and there is no minimum or maximum capital required to start.
The disadvantages it faces are owner might face difficulties in raising capital, unlimited liability, no successor when owner dies or is incapacitated. And there’s no division of responsibilities. A partnership is another form of business where by two or more people come together to run a common business.The profits and losses are usually shared according to the agreement made. Once a member dies or leaves a new management has to be set up a fresh. Another form of partnership is limited partnership in which members are not liable to any debt.
Advantages of a partnership include cheap cost since the cost can be easily contributed by the partners and in this case there are high chances of raising more capital and has reduced tax since there is no payment of corporation tax.Its disadvantages are it has unlimited liability, has a short life for example when a member dies or retires, at times it can fail to raise the required number of partners and capital.
A limited liability corporation is one which is treated as a separate person from its owners. In a limited company there exists a separate legal identity, different from its shareholders meaning that it can be held responsible for any debts arising.
There also exist Private and Public Company.Most private companies are usually small in size since they may be formed by one or more persons. The main difference with public company is that the number of members is restricted to 50 and it is not allowed to offer its shares for subscription to the public at large. The Shareholders of a limited liability company attain their return in the form of a share of the profits, called dividends. The directors think about the amount of profits and make decisions on the level of profit to be disseminated as dividend and amount of profit to be retained in business as coffers. It is important to note that the shareholders cannot propose a higher dividend for themselves than already proposed by the directors.
The advantages of a limited company of members are like it’s easy to raise the required capitals, easy to transfer ownership through share transfers and easy to pass ownership of a company from generation to generation. The disadvantages of a limited company are as follows; there is a tax burden since the shareholders are taxed twice i.e. first on the company profits and second on the shareholders dividends. The company has to sign up document that comply with the registrar of companies and tax authorities annually. For it to be fully registered and this increases the operating costs.
I will need do some budget allocation for our money as follows: first we will pay rent $4500 in advance for rent for 3 months, use $100 for media for advertisement for a period of 7 days our store this will cost $500 , furnish store using $300,pay license of the next 6 month worth $400,buy jewelry suspenders and glass display cabinet worth $250,buy stationary eg pens ,receipt book worth $50 and finally wrap papers worth $30.The remaining $13980 will be spent on buying the jewelry. After everything is ready then we can so that it starts operating.
Therefore in conclusion after evaluating all the forms of business organizations I think the best me and my brother can venture into is the partnership. When compared with other forms it’s the most favorable for us for our small jewelry store.
Reed, Shedd, Moorehead And Corley the legal and regulatory environment of business,by 14th edition.