Agency and business organizations - Assignment Example

? Agency and Business Organizations The type of a business organization determines how it is operated and managed. The different types of business ventures have different structures and are differently managed. The laws that govern their operations also have some little differences. Before starting, a business therefore, the proprietor has the responsibility of making the decision on which form of business organization can best make him/her realize business goals. In doing so, it is important to analyze the advantages of the different business organizations. Examples of business organizations include: sole proprietorships, franchises, partnerships, limited liability partnership, limited liability companies, joint venture, syndicate, joint stock companies, business trusts, cooperatives and corporations. Sole proprietorship A sole proprieto0rship is a form of business entity that is formed and managed by one person. This business has the advantage of simplicity information, as it does not require long formation procedures. The owner also has the advantage of enjoying all the profits and faster decision making. Moreover, sole proprietorship businesses also have the advantage of tax simplicity and the owner will not be required to make complex tax return to the authorities (Bouchoux, 2007). Despite the advantages, sole proprietorship business also suffers from several drawbacks. First, this form of business entity faces challenges in acquisition of capital for its projects. The major drawback of this business however is the fact that the owner has unlimited liability on the losses and risk of the business. The owner and the business is the same entity and therefore losses and risks of the business are completely borne by the sole owner. In addition, sole proprietors businesses face management problems, as the owner has to work for many hours and sometimes lack the skills required in managing the business (Bouchoux, 2007). Partnership This is a form of business organization in which two or more individuals enters into an agreement to start and operate a business entity. The partners have equal rights and obligation to the business. In the case of general partnership the partners and the entity is considered as an entity. Partnership businesses have the advantage of easy procedures in formation, combined skills, and efforts, ease of raising more funds from the partners and the moral support from the members in the partnership. The partners can therefore share the risk and losses that might arise from the operation. The various limitation of partnership business include: long procedures in making decisions as all the partners have to be consulted, partners are also individually responsible for the actions of other partners. Moreover, partnership business involves the sharing of profits, unlimited liability on the partners and limited lifespan (Markman & Lesonsky, 2010). The death or disagreements can always result into the dissolution of the business. Limited liability partnership LLP is a form of business organization that has the characteristics of both a partnership and a limited liability company. In LLP, the partners’ liability is limited and the partners are not liable for the action of other partners. The partnership will remain liable on its assets and the LLP is considered a different entity. This form of business organization has the advantage of limited liability on the partners and the flexibility in operation just like in the general partnership. LLP the disadvantage of difficulty in the formation and in the filing of returns. This makes the business be complex to manage and operate. The government might also closely monitor the operation of the partnership. Limited liability Company This is a form of business organization in which the owners have limited liability and blends the characteristics of both partnerships and corporate structures. The business is a separate legal entity and the members’ liability is limited to the proportion of the unpaid shares. It has the advantage of limited liability on the members, easy transfer of shares, unlimited life span, and flexible distribution of profits (Markman & Lesonsky, 2010). The businesses also have the advantage of ability to raise large capital for their investments. LLC also have numerous drawbacks. First, the formation process may be long. Moreover, LLC must file returns with the security exchange commission to show that its operations are consistent with the legal requirements (Warda, 2003). There is also a problem of long decision-making process since decisions can only be made during the annual general meetings. LLC are also required to make long taxation returns hence making the process tiresome. There are also special types of business organizations that are open for Ernie to pursue. First is a joint venture business. Joint venture is a form of strategic alliance that is entered into by two or more parties to share the markets, assets or knowledge and profits. In a joint venture, there is no transfer of ownership and is based on achieving a strategic objectives. Joint ventures are advantageous in that the ownership is not diluted and there is sharing of the profits or losses. The sharing of knowledge assist in realizing strategic goals (Warda, 2003). It is sometimes difficult to get a strategic partner capable of fostering the business in achieving the strategic objectives. It is also sometimes difficult to harmonies the diverse cultures of two or more different organization. This hampers the realization of the goals. A syndicate is a form of organization in which groups, individuals and companies that are organized to further the common interest of the owners (Salaman, 2001). Some of the syndicates promote criminal intent. The form of organization has the advantage of focusing on particular interests and therefore leads to realization of the organization. A franchise on the other hand involves the use of another company’s business model to achieve organizations success. The form of business organization enhances profitability and helps in the developing of unique concepts. It is also cheap and inexpensive to operate. Cooperatives are also a form of business organization in which individuals with similar interests put resources together to further their interests and promote its welfare. It is a separate legal entity and the liability of members is limited. Moreover, cooperatives assist their members who are in problems and can raise large sums of money. The only challenges are that they may require long formation procedures and long decision procedures. Corporations just like companies are separate entities with the ability to raise fund for investments. It shares similar advantages and drawbacks with LLC. Q2. I would advise Ernie to start a sole proprietorship since it matches most of the specification. Firs sole proprietorship requires little amount of capital to begin and therefore resources that will be required to start the business will be little. Moreover, Ernie wants control of the business. It is only in sole proprietorship that the opportunity to manage the business and control the business solely will be granted. However, Ernie will have the opportunity to change the form of business organization I future to realize her dream of incorporating friends and employing personnel to help execute the business tasks. Through changing the form of business in the future, she will be in a position to raise more capital required in expanding operations and in meeting the increased business expenses. At the start, Ernie, must start the business as a sole proprietor and enjoy all the control and benefits that might arise from the business. It is only in the future that she will be able to be as if a manager after the business has been made a LLC. Q3. In starting the business, Ernie will have to perform various roles. First, she will have a role of registering the business. This is because he has generated the idea and has all the knowledge about the kind of business and knows exactly what it requires. Ernie should also perform the managerial roles that are associated with the business. This will ensure that the business gets the necessary stewardship in making the business realize its dream. It is only through being in the management position that Ernie will be in a position to coordinate the business and form alliances or partnerships that will be needed to make the business grow and become a LLC. Managerial roles will also make Ernie be in a position to give direction and offer the leadership directions to the employees in enhancing the performance of the business. Besides, Ernie should also perform the role of deciding which activities the capital of the business is to be invested. This is the only way the business will get the opportunity to maximize returns and generate the internal resources that are required for growth and expansion. Similarly, this will provide Ernie the opportunity to fully understand the business and the challenges the business faces in its operations. As a result, Ernie will be in a position to understand the operations of the business after assuming managerial role in future. To ensure that she becomes a manager in the future, she will have to buy the company’s shares after incorporation as this will enable him get the right to make decisions that influence the business decisions (Watson, 2009). Q4. The services offered by the firm will have to be paid based on the amount of advice and assistance that is pegged on the rates of the company. The payments will also be based on the time spent and the form of organization that Ernie wished to engage in after the advise. To ensure that the dues are paid, a fee would therefore be charged based on the performance of the business and the proceeds that can be traced to the advice offered. This may be a percentage on the capital invested or the sales made by the business. In summary, before starting a business organization, it is important that the advantages and drawbacks are evaluated to help make appropriate choices. In addition, the form of organization to start will depend on the nature of operations of the firm and the type of business to operate. References Bouchoux, D. E. (2007). Business organizations for paralegals (4th ed.). New York: Aspen Publishers. Markman, M., & Lesonsky, R. (2010). Start your own business: the only startup book you'll ever need (5th ed.). Irvine, Calif.: Entrepreneur Press. Salaman, G. (2001). Understanding business organisations. London: Routledge in association with the Open University. Warda, M. (2003). How to form a limited liability company (2nd ed.). Naperville, Ill.: Sphinx Pub. Watson, S. (2009). The law of business organisations (5th ed.). Auckland, N.Z.: Palatine Press. Top of Form Bottom of Form Read More