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Re: Business Formation of Potential Cardigan Home Store
There are a number of forms of business units that one can start operating their business. Some business organizations can be formed by one person, a group of people or even by the government .They have various features as well as advantages and disadvantages. This paper shall discuss the sole proprietorship, partnership and corporations form of business units.
The sole proprietorship is a business enterprise owned by one person who is referred to as a sole proprietor .They are the most common forms of business units. This is due to the fact that they are easy to start and the owner enjoys profits alone. However, the sole proprietor suffers the losses alone (Kelly, 2012).
Its advantages are; it is easier to form since there are fewer legal formalities required to start up the business. The sole proprietor is not required to submit business tax report which saves them from additional costs on accounting and tax filling. There is fast decision making since the owner has full control over the business decisions. However, the business owner is liable for any violations, losses or debts suffered by the business. In case of death, insanity or bankruptcy of the owner the business is dissolved. In addition, the owner has difficulty in raising capital given that they provide the initial funds and has limited access to loans.
The partnerships on the other hand, are owned by a minimum of two persons and a maximum of twenty. The partners raise more capital as each partner is entitled to capital contribution. They share workload and responsibilities as well as business risks and expenses. They harmonizing the different skills and contacts of each partner which makes them achieve greater financial results (Tracy, A., & Tracy, T., 2013).
Then again, the partners have to share the all the profits realized from the business. Yet again, they, one does not have total control over the business. Before decisions are made each partner has to be consulted which makes the decision making process slow. It does not have a separate legal entity from the business. In case of death, insanity or bankruptcy of one partner, it results in termination of the partnership.
As for the corporations, they have a limited liability. The members are not personally liable for the business debts, and assets. Once the business has been fully incorporated, the personal assets of the owners are protected from debt collection, law suits and other business issues that can arise. They have continuity. Owners’ death does not lead to its dissolution. Its disadvantages are that, the incorporation process can be time consuming and expensive. Many legal formalities have to be adhered to for the process to be complete. They also face double taxation. First, they pay the corporate tax on the profit, and then it pays dividends to the shareholders. It lacks secrecy as they have to submit tax returns and annual reports (Piotrowski, 2001).
The most suitable business organization for the Cardigans would be the corporation. Since they are beginning their practice, they will have liability protection. They may wish to s corporation status at the start of the business, when the business is likely to experience losses. The losses will be absorbed by the business rather than the business. Additionally, the corporation does not tax on its incomes. As compared to the sole proprietorship and the partnership business organization, the corporations have a limited liability and continuity of life, which is advantageous to them.
‘Cardihome Furnishings’ would be an appropriate name for Cora and Caley Home Décor store. ‘Homigans Fine Furnishings’ is close to ‘Home Fine Home Furnishings which may lead to confusion among potential customers willing to purchase the Cardigan family products instead of the other corporation’s products. Cora and Caley will have to fulfill the following filling requirements; the income tax, the estimated tax, the employee taxes and the excise taxes.
Kelly, M. (2012). Study guide for busn 5 by Kelly, Marcella, and ISBN 9781111826734. Place of publication not identified: Academic Internet Publish.
Piotrowski, C. M. (2001). Professional practice for interior designers. New York: J. Wiley.
Tracy, J. A., & Tracy, T. C. (2013). Small business financial management kit for dummies. Hoboken, N.J: John Wiley & Sons.