Before venturing into a new business, it is vital for the owners to analyze the situation and the various factors that are critical in determining the structure of the business. Given that the business would involve the two of us there are factors that we shall put into consideration before deciding on the business structure that would be suitable. The first important thing we shall consider is the management of our business. As the owners of this new business we shall endeavor to have control over the management of the new business. We do not want a situation whereby another party would come in and control the management of the new business.
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The structure that we would arrive at must enable us to retain control of the administration and management of the business. In this case only the two of us shall be the major policy and decision makers of the business. Capital of the new business is also a factor to be put into consideration. The amount of capital has to be decided and how it will be raised will also help in determining the business structure.
Our business will be focused on making craft items and selling them on the internet so as to make profits out of the anticipated sales. This purpose will be very important in our choice of structure. The income that is expected to come from the business will be divided amongst the two of us for our own personal development. There would be need for the business ownership to protect the assets of the business from the creditors. This would also be factor when deciding on the choice of structure for the business.
The cost of venturing into the new business would also be a factor in determining the structure of our new business. Costs of the business would include the initial costs of establishing the business plus the costs of maintaining and running the business. This would be important in determining the structure because they will have implications on the two of us as the owners. We shall focus on minimizing the costs that would be needed for starting the business and running it to profitability.
Matters concerning taxation would also be factored in the course of choosing the structure. The structure arrived at should be such that it would minimize on the tax we shall be required to pay for marketing our products and making sales on the internet.
The tax liability is different for the various business structures. This therefore means that a suitable structure for our business should be one that does not take a lot in terms of tax.
On the basis of this analysis the best structure for our new business would be a partnership. This form of structure would allow fro flexibility in the business this is in terms of decision making. The changing business circumstances would be accommodated by this structure with little consequences. It would also help to protect the assets of the business with the two principles in control. A partnership would also be important in as afar as minimizing the costs of the business and especially and as far as taxation is concerned. Above all, all the profits that would be gained from the business would be distributed efficiently with this form of structure in place.
Ferrell, O.C., Fraedrich, J., & Ferrell, L. (2008). Business ethics: Ethical decision making and cases (7th ed.). Boston: Houghton Mifflin Company/South-Western/Cengage Learning.