Business Formation, Research Proposal Example

Pages: 1

Words: 544

Research Proposal

Business situation 1

The vision of the business here is to expand its capital base and increase its assets in order to increase the profit realized. The vision seeks to improve the current financial situation of the entity as well as streamlining the payment methods to ensure the customers pay on time. The improvement of the financial position will ensure that the business does not fail to pay its bills. The business will have additional money to settle these bills even in situations where customers delay their payments.

The legal issues in consideration, in the modification of the business, include the cost of the modification. The other issue to consider would involve the management of business, management in this case is particularly crucial, as the decisions made must not conflict with that of Joe, therefore, he is better managing the business himself. It is also essential to consider taxation issues in the modification of the entity, as the income of Joe is dependent on the success of the company. Joe must also be concerned about the going concern of the business and its stability because of the modification.

The appropriate legal entity in this case would be a sole proprietorship. The choice of a sole proprietorship is best because Joe owns the entity including financing it alone and the entity would be comprehensible and inexpensive in terms of taxation. The structure of a sole proprietorship is straightforward and inexpensive as the business will operate on the same basis as before but incorporate a sense of professionalism within it. The legal structure of the business will assist Joe in streamlining the activities in relation to customers as well as protect the business against any risks.

Business situation 2

The vision of the business by the five friends is to form a construction company where all the friends contribute in order to form the company. The contributions to the formation of the company will not be equal for all the five contributors, and they will need outside funding in order to raise the capital required. The concern of the five friends is the finances for business and losses in case the business fails.

The legal issues, in the situation, involve the management of the business where it is necessary that control the business. The management of the business is essential as the decisions made determine the outcome in terms of profits. The source of financing also poses a challenge in the realization of the objectives of the business. The choice of the financing option has consequences, and the choice affects the management or the risks the personal assets of the friends.

The best entity of choice for the friends would be a joint stock company. The choice of a Joint Stock Company fits the situation since the personal assets of the five friends not risked by using them as collateral in the bank. The choice also founded on the basis that the contributions in the joint stock company translate to the extent of liability for the stockholders. The friends will not shoulder all the risk associated with the failure of the company, as the other stakeholders will absorb it. The choice also preferred as the transfer of shares in the structure of a joint stock company is easily and without any restrictions.

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