Different Types of Business Organizations
Discuss About The Alliance Practices To Alliance Capitalism.
The assessment states that a business is to be established by an individual for which the funds will be provided by a banker. The assessment considers the variety of options which the individual has for the purpose of establishing the business (Burns and Dewhurst 2016). The assessment will be considering the different forms of business organizations which can be opened by the individual (Scarborough 2016). Some of the business organization structure are discussed in the coming paragraphs.
The different forms of business organization which can be established by the individual judging from the nature of operations and capital structure which is required for that business are discussed below:
Sole Proprietorship: In this form of business, the individual will be the owners of the business and all the major decisions regarding the business are to be taken by the individual. An example which can be given for such types of business are generally retail stores business (Abdulsaleh and Worthington 2013). There is no separate entity for the business which means that the sole trader and the business are one and the same.
The risks which are associated with a sole proprietorship business is entirely on the owner of the business. This means that in a situation of a loss, all loss must be bear by the owner of the business (Schaper et al. 2014). There is the risk of liquidity in such business and often are subject to debt traps.
The benefits which can be identified in case of a sole proprietorship business are provided below in point format:
- The registration process in case of Sole Proprietorship business is simple and not difficult to implement.
- The business is under the direct control of the trader and all important decisions regarding administration and management are on the owners of the business (Stucki 2013).
- The business also does not require too mush funds to set up and also operate in the market and hence is a viable choice for establishing the same.
The limitations which are associated with the business of sole proprietorship are shown below in points form:
- All the losses which the business faces are to be bear by the owner of the company which means that the owner has unlimited liability.
- The capital requirements in such form of business is not much and therefore there is little scope for development of the business.
- Partnership form of Business: In a partnership form of business, there are two partners who are responsible for the overall management of the business. In other words, partnership form of business is a legal form of business which is operated by two or more person (Neubauer and Lank 2016). Partnership form of business has major types which includes firms with limited liability, partnership with unlimited liability. An example of partnership business can be given of auditing firms and various accounting firm.
The risks which are associated with a partnership form of business refers to the unlimited liability factors which the business faces except a limited liability firm. There is always the risk of liquidity in a partnership form of business. Moreover, the business is not a legal entity and therefore the business does not enjoy the privileges of a company.
The benefits which are associated with a partnership form of business are explained below in details:
- The management of Business are effectively done in partnership form of business as the responsibility of management is on two or more person.
- A partnership form of business is very easy to establish as set up as registration is not mandatory in this form of business (Urban 2013).
- The affairs and operations and performance of the business are private matter and the same does not need to be published to the general public.
- Legal Structure of a business is easy to changes under this form of business.
The disadvantages which are associated with a partnership form of business are discussed below:
- The liabilities of the business and of all the partners are unlimited in case of this form of business.
- Each partner is jointly and severally liable for all the liabilities and debts of business and also acts as an agent of the partnership and liable for the acts of the partners as well.
Joint Stock Company: It is a legal form of business which has a separate legal entity and the business is separate from the owners of the business. In this form of business, funds are collected by issuing shares and the shareholders are the owners of the business. The overall management of a Joint Stock company is with the directors of the business who act as a representative of the shareholders of the business (Calin 2014). The special characteristic of this form of business is that the business has limited liability which is limited to the shares which is owned by the business.
Benefits and Limitations of the Business
The risks which are associated with a joint stock company form of business are limited and lesser in comparison to other form of business (Melnik and Dyrdonova 2014). The risks in company form of business are often related to the market fluctuations in shares prices and also intense competition which is faced by the company from other competitors. In addition to this, there is risk of frauds in a company form of business.
The benefit which are enjoyed by a Joint stock company are stated below:
- A company form of business has accessed to large capital source and meet the requirements easily.
- The business has limited liability for the owners of the business and also has further scope of expansion (Brown 2014).
- A company has a business has a separate existence which is different from the owners of the business and has a legal identity of its own.
The limitations of joint stock company are pointed out below:
- The initial stages of establishing a company form of business is complex in nature and therefore, it is difficult to establish a company form of business.
- In a company form of business, there is a risk of frauds which are very much common in nowadays scenario.
- The decision-making process in a company takes time as it is considered and passes through lots of layers.
One of the major decision which any business needs to take is regarding the financing requirement of the business. The sources of finances which are used by different forms of business are different in each case. The sources of finances for each organization structure are shown below:
- Sole Proprietorship:In a sole proprietorship form of business, the owners mostly uses own capital as a source of financing and establishing the business. The owners can also opt for loan facilities from banks in order to finance the business (Evbuomwan et al. 2013). In addition to this, the owner also can use different sources such as personal savings, retained profits, sales of asset.
- Partnership Business:In a partnership form of business, the partners who enter a partnership business bring in capital for the business. In addition to this, a partnership business can also raise loans from financial institutions. The business can also use retained profits for financing of the business (Lee, Sameen and Cowling 2015). In addition to this, the business can also induct new partners for bringing in additional capital for the business.
- Joint Stock Company:In a company, the main source of finance is the share capital which is collected from the owners of the company by issue of shares. The business can also use loans as a source of finance for managing day to day operations of the business (Philippon and Reshef 2013). In addition to this, the business has the option of using retained earnings, venture capital financing. The business can also use sales of assets as well as a source of finance for the business.
As per the consideration of the different business structure, the entrepreneur in this case will be establishing a partnership form of business in order to establish a café restaurant business. The legal consideration which the entrepreneur needs to consider for establishing the business is taking permission for the restaurant business and also bearing the initial expenses which are related to setting up of the business. Moreover, it will be in the best interest of the entrepreneur to register the business. In addition to this, business also needs to consider the legal requirements which is force in the country for such a business. In addition to this, the management also needs to considers all the rules and regulations as to quality standards, monopolistic practices, environmental consideration before establishing such a business.
The entrepreneur wants to establish a partnership form of business so as to have access to wide source of capital as per the requirement of the business. As per the present market condition, the café business is blooming as the demand for such type of business is more in the present generation. The business will be targeting the office workers and younger generation as they are more attracted to the coffee products and fast food products of the business. As per the plan of the management, the business will be offering coffee and other beverages and also other bakery products and fast food products. As per the analysis of the market condition, it is cleared that intense competition exist in the market of case business and therefore, it will be difficult for the business to enter such a market. In such a case, the business needs to formulate a plan to gain competitive advantage in order to face intense competition.
Sources of Finance for Each Organization Structures
The business which the entrepreneur is planning to establish is a café business which will be offering a variety of food products including desserts and bakery products. The mission and vision statement of the company are stated below:
The entrepreneur is considering opening a café business as per the requirement of the business (Goetsch and Davis 2014). The mission statement of the company which is planned by the entrepreneur are discussed below in details:
- To establish a name for the business in the market.
- The business will be offering a large variety of beverages and bakery products to the customers
- To provide the best coffee and beverage experience to the customers and promote brand loyalty among the customers
- To build up a brand name of the business in the local market
- The business wants to support the needs of the society and the community.
The objectives of the business as per the planning of the management is to establish the name of the company in the market and also establish the business in the local market. In addition to this, the management wants to further expand the business of the company in new markets and also further diversify the products of the business. Another objective of the company is to earn steady profits in order to generate constant revenue for the business. The management also needs to develop proper infrastructure for the business.
The business structure of the company will be managed by the owner of the business and day to day management of the business will be managed by the manager of the business. The location of the shop will be established in an area which is busy and has access to all necessary resources which are required to establish and effectively run the business. As regarding the decision of business structure, the decision of the entrepreneur is to establish a partnership for of business. The entrepreneur has certain individuals in mind who can be potential partners of the business. In addition to this, the overall fund requirement to start the business will be divided in the ratio of number of partners involve and in the partnership (Fleisher and Bensoussan 2015). Therefore, funds can be accumulated for the initial costs. The entrepreneur also plans to register the firm so as to have a legal impact in case the requirement arises. There is another advantage which is associated with a partnership for of business which is each partner is responsible for management of the business and therefore the workload of each partner can be divided and can also lead to better management practices for the restaurant. It is also decided that initially the business will be opening one shop and all the resources will be applied for setting up the business and creating a name for the business in the market.
Evaluation of Legal Consideration
As per the plan of the management, the café business will be offering a variety of beverage drinks so as to meet the preference of each customers. In addition to this, the business also needs to capture the market and also gain competitive advantage. The main product of the business will be different variety of coffee products such as Cappuccino, Espresso, Long Black, cold coffee, ice tea and other variety of beverages. In addition to this, the café will be offering complimentary products such as pastries, burgers, pizzas, garlic breads, cookies. The flavor and the quality of the products which are to be offered by the café will be of highest standard.
The target market of the business as per the plan of the owners will be younger generation and also the office workers. The business will be offering best quality of expresso and regular coffee to the office workers. This will allow the business to attract potential customers in the business. In addition to this, the café will be focusing very discreetly on the interior decoration and presentability of the restaurant so as to create an attractive environment for the customers. This will provide a place for dates and meeting place as well as per the plan of the owner. The management of the business is also planning to operate in early hours of the day so as to provide breakfast services to office workers and general customers as well.
As per the present scenario of the market, the management of the business expects that the business will be mostly affected by intense competitive pressure which exist in the market place. The level of competition in the fast food industry is intense as a lot of competitors exists in the market. In addition to this, the business is also affected by the overall market demand for the products of the business. The analysis of the market condition makes it clear that the business needs formulate a plan to combat the intense competition which the business faces. The demand for coffee and beverages is immense for the people and the same also acts a stress buster and a refreshment for the general public (Antonelli, Crespi and Scellato 2013). Therefore, the expectation of the business is that the café business will be able to meet the demand of the customers and also will be able to create brand name and promote customer loyalty due to the uniqueness of the products of the business.
Market Conditions
As per the plan of the management, the Café which is to be established will be specializing in beverages, bakery products and finger food. The owner plans to include all those products which are preferred by the younger generations and also include the regular beverages and complimentary products which are preferred by office workers as well. The business will be offering discount and also combo offers for attracting more customers to the restaurants. The business will be focusing on the different varieties of beverages which are to be offered by the business.
In case of forecasting of income and expenses of the business, the management needs to set the targets for sales and also ascertain the expenses which the business might incur during the period (Berman et al. 2016). The forecasted profit and loss account of the business is shown below:
The statement of profit and loss which is projected shows that the owner expects a profit of $ 138,000 and in second year the same is expected to rise to about $ 200,000. The café expects a revenue generation of $ 1,200,000 in the year 2018. The business is expecting an increase in the overall sales of the business of 20%. The expenses of the business also increase as the sales revenue of the business increases as shown in the profit and loss statement.
The assets which will be used by the business includes various equipment which include ovens, fridge and similar other equipment. The assets of the business will also be including furniture which are necessary for setting up of the business. The capital will be brought in by the partners of the business. The major source of funds for establishing the business will be acquired by taking a loan from the bank as shown in the Balance sheet of the company above. An estimation of the start up costs of the business is provided below
The start up funds requirement of the business is showing in the above statement. The major source of funds for the business is from loans and the capital which is brought in by the partners of the business.
In case the targets which are set by the management, the management needs to review the plans of the business and the management needs to establish proper control so as to ensure that the business is following the plans which is set.
Reference
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Antonelli, C., Crespi, F. and Scellato, G., 2013. Internal and external factors in innovation persistence. Economics of Innovation and New Technology, 22(3), pp.256-280.
Berman, J.Z., Tran, A.T., Lynch Jr, J.G. and Zauberman, G., 2016. Expense neglect in forecasting personal finances. Journal of Marketing Research, 53(4), pp.535-550.
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Calin, D., 2014. Joint Stock Company. RRDA, p.119.
Evbuomwan, G.O., Ikpi, A.E., Okoruwa, V.O. and Akinyosoye, V.O., 2013. Sources of finance for micro, small and medium enterprises in Nigeria.
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Urban, S., 2013. From alliance practices to alliance capitalism: new strategies for management and partnership. Springer-Verlag
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