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Business Planning And Structures Essay

5458 words - 22 pages

Business Planning and Structures

The main structures that shall be examined in the context of this
venture are: partnerships, joint ventures, companies, trusts and sole
partnerships. For the purposes of the investments under consideration,
there could be a number of structures that might be applicable for
each but not all will be necessarily as efficient. The most probable
structure that might be utilised to facilitate each investment is as
follows - implement the retail business as a sole trader, farm as a
partnership or joint venture, joint venture or company for the
speculative mining venture and set up a trust or company for the long
term investment portfolio. The rationale will be elucidated below.

A Retail Business

The retail business is usually associated with being a sole trader
owing largely to the fact that there are few legal formalities,
negligible costs and relatively simplified direction taxation
associated with its establishment. Further, any profits made will be
used entirely at the sole trader's discretion, so theoretically
speaking, the father could install himself as the sole trader and
distribute profits at his appraisement. The negatives, of course, lie
in the fact that it would be difficult to raise a large amount of
capital and, more importantly, should anything untoward occur, there
is unlimited liability on their part. For a retail business, this
would be ideal, however, should it become a large, on-going concern,
perhaps incorporation would be more advantageous, for example if one
needs facilitation for franchising. Also, should the father or
sole-trader die, the business will also end which is not necessarily
in keeping with the implicit intentions of the formation of the
business. A partnership might have been successful but in the context
it might be unwise given that it would be easy for taxation problems
to arise with distributions among the children, although financing the
venture would be much easier.

A Farm

If the family is considering primary production as an investment, the
optimal structure for operation would probably be a partnership
although a joint venture may also be used. The advantages of operating
as a partnership are that there are no partnership taxes to be paid,
only individual income tax, the ability to borrow more capital than a
sole trader and the fact that partnerships are informal and
inexpensive to establish. On the downside, there is, similarly to a
sole trader, unlimited liability for the partners and each partner is
responsible for every other partner's liability, should the business
investment fail. There is also the same issue of the partnership being
dissolved upon the death of either of the parents assuming they are
both partners. As mentioned above, each of the partners is an agent
for another, a situation which could be financially perilous given
that the children may not have sufficient business acumen to conduct a
farm and...

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