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Potential Cardigan Home Store Business Formation

Memo - Potential Cardigan Home Store Business Formation

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Institution

Date

Potential Cardigan Home Store Business Formation

Memo – Potential Cardigan Home Store Business Formation

Date:

To: P. Strami and Mable Bacon

From:

Re: Potential Cardigan Home Store Business Formation

Owing a new business is one of the big decision for any industrialist. There are three fundamental types of business ownership. 1st is partnership, 2nd is sole proprietorship, and the 3rd one is incorporation.

A small business with only one worker is called the owner Sole proprietorships. on the other hand,to run a business an industrialist needs to appoint a manager in sole proprietorship to run the enterprise on a daily basis (Kelly, 2013). It is the duty of owner to realize all the profits from the business and in case of loss assumes accountability. The sole proprietorship is the easiest form of ownership among all. It is the highly used type of ownership. Selection and registration of the business name is one of the essential things to be considered (Kelly, 2013). It is needed to register any business name with a local government agency that does not completely incorporate the personal name of the business holder (Kelly, 2013). Regarding to the function of the business, all the choices are made by Owners of sole proprietorships. The possessions of entrepreneurs and its business are combinly considered in sole proprietorships (Kelly, 2013). In short, the benefits are as under:

· One can easily start with Sole proprietorships.

· For instituting it, No formal action is required.

· with Sole proprietorships can be defined at once

· All aspects of the business are controlled by owner.

· all the profit got by the owner

· no income tax is given by the enterprise; it is given by the owner.

on the other hand, it has some drawbacks:

· The business incurs by the unrestricted accountability for losses, debts, and other liabilities of the owner.

· All the choices are made by the owner.

· Capitalization and financing are organized only by the proprietor.

· On the death of owner, the business ends.

Two or more individulas affiliate the partnership to continue as co-owners of a business for profit. It is assumed in The Uniform Partnership Act (UPA) by the state that reagrd to partnership law there is an offer of degree of uniformity in the state (Kelly, 2013). In the case of consideration of two or more entrepreneurs in a partnership it is needed to done a written partnership agreement (Kelly, 2013). There are many forms of Partnerships; but, the most common partnerships are general partnership and limited partnership. Entrepreneurs have to be familiar with the characteristics of each other. Due to some reasons, A partnership may be finished. At any time a partner may leave or start the partnership, there is a chance of either partnership or as well agreement termination. In some cases, there is indication of termination of partnership in the law (Kelly, 2013). In the case of death, bankruptcy or madness of a partner the partnership terminated. Also, if the purpose of business is unlawful the partnership may be terminated. Its benefits are:

· A partnership agreement is not needed by law so Start-up can be easy.

· As an entity, no tax is paid by the partnership.

· In taking decision, managing and capitalizing the business, accountability is shared by Partners.

The cons are here:

· The break-ups of partnership are on a high percentage.

· Unlimited financial liability is carried by partners.

· For the mistakes of his or her partners, each partner bears liability.

· Profit is shared by Partners.

a legal entity which is a corporation is created by law. A legal entity and an artificial person are similar. All the tasks which an artificial person can do are performed by a corporation can perform, just as payment of taxes, accrue debt, contracts entering, be held responsibility of negligence and making a profit. One or more individuals developed a corporation. Promoters are the persons who start the process of incorporation (Kelly, 2013). With a state agency, Articles are filed by the promoters of Incorporation. It may be the Secretary of State. At the time of placing Articles of Incorporation, important taxes are paid by the promoters to incorporation (Kelly, 2013). When all requirment are completed, a state official which may be the Secretary of State issued the charter. Entrepreneurs must have an attorney for filing the papers (Kelly, 2013).,there is a deal of Ownership of Having the stock corporations (Kelly, 2013). There are five main categorize of Corporations: 1: domestic, 2: foreign, 3: public, 4: private and 5: closely held. On the bases of legal structures of corporations, there are many merits:

· Limited liability – there is low risk in it comparing to other forms of ownership. In the corporation, in the purchase of stock the liability of shareholders for debts, taxes, and lawsuits are limited to the amount of money invested.

· Ability to raise capital – the corporation is able to lift additional capital. The biggest advantage is the sale of stocks for this form or ownership. Corporations have offers of getting loan by the Leaders than sole proprietorships.

· Transferable ownership – if the business is not manage by the shareholders (owners), through the buying and selling of stock ownership can change without upsetting the day-to-day business of the corporation.

The drawbacks are:

· Double taxation – it is cleared in most of the examples that on income which is gained from a corporation person have to pay taxes more than one time. Income tax is paid by the corporation on profits gained due to the Working as a legal entity. In addition, on getting any dividends from corporation, shareholders pay additional tax. Tax is double paid by the Employees who are shareholders.

· Costs of Charter – To incorporate a business there are high costs. It has fees of attorneys and state requirements.

· Deficiency of control – in a corporation ownership any control in the daily operation of the business is not guaranteed. Ownership of stock is allowed only to cast vote for the board of directors. The working of business is decided by the president or CEO.

For the Cardigans, partnership is the best kind of business organization. It is admitted that they are two and desire to work together. They have chosen are perfect names because these names are not used by anyone else. These names are unique. They are not able to incorporate their real names is the only predicament with them. they will have to registered and copy-write it before using these names , in this way, one can establised and identified his own business.

References

Kelly, M. (2012). Owning our future: the emerging ownership revolution. San Francisco, CA: Berrett-Koehler Publishers.