Question 1: Choice of entity1. For the following situations, applying what you have learnedabout...Question...

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Accounting

Question 1: Choice of entity
1. For the following situations, applying what you have learnedabout sole traders, partnerships, limited partnerships, andcompanies consider the most appropriate organisational structurefor the enterprise. In each case give a reason, or reasons, asappropriate, to support your suggestion. Guidance: Your reasons foreach part of this question should include why one or more of theavailable options are excluded, as well as the reasons that supportyour suggested organisational structure.
(a) Raya, who works in a gym, occasionally sells to sportsmagazines articles she has written on new developments in personaltraining.
(b) Three friends start a café. All three will be active indecision making but a precise organisational structure is requiredfor operational practicality. The project involves a degree ofbusiness risk and they wish to protect their personal liability asmuch as possible. Some flexibility is also required as it isenvisaged their spouses will be added to the group over time astheir business expands. They do not require their participation inthe enterprise to be secret and are happy to get any publicityavailable.
(c) Dion is a scientist who has developed an enzyme that breaksdown plastic drink bottles. He wishes to patent and develop hisdiscovery. Iosefina, Rosa and Michelle are low profile venturecapital providers who are not technical experts in the scientificfield but have money to invest in high risk start-up businesseswhere successful development brings a high financial return. Theyagree to provide some funding for Dion’s project. They do not wantto take an active part in the business other than in providing themoney required and receiving a share of the anticipated profits. Ifthe project fails, Iosefina, Rosa and Michelle do not want anyfurther liability in addition to the money they have alreadyprovided. They also wish to keep their involvement in the projectsecret.
2. Explain two ways in which joint venturers could ensure theydo not form a partnership.
3. Compare the use of a partnership and a company as thebusiness form for SMEs when new capital is introduced.

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3.6 Ratings (572 Votes)

1a Raya as individually dealing to sell magazines can go for Sole propertiership as it is easy to inform having complete managerial control to the owner 1b We recommend to form a Company for the following reasons i They wish to protect their personal liability and the Company stakeholders are having LImited Liability ii They want flexibility It is easy to add stakeholders in a company iii They See Answer

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In: AccountingQuestion 1: Choice of entity1. For the following situations, applying what you have learnedabout...Question 1: Choice of entity1. For the following situations, applying what you have learnedabout sole traders, partnerships, limited partnerships, andcompanies consider the most appropriate organisational structurefor the enterprise. In each case give a reason, or reasons, asappropriate, to support your suggestion. Guidance: Your reasons foreach part of this question should include why one or more of theavailable options are excluded, as well as the reasons that supportyour suggested organisational structure.(a) Raya, who works in a gym, occasionally sells to sportsmagazines articles she has written on new developments in personaltraining. (b) Three friends start a café. All three will be active indecision making but a precise organisational structure is requiredfor operational practicality. The project involves a degree ofbusiness risk and they wish to protect their personal liability asmuch as possible. Some flexibility is also required as it isenvisaged their spouses will be added to the group over time astheir business expands. They do not require their participation inthe enterprise to be secret and are happy to get any publicityavailable. (c) Dion is a scientist who has developed an enzyme that breaksdown plastic drink bottles. He wishes to patent and develop hisdiscovery. Iosefina, Rosa and Michelle are low profile venturecapital providers who are not technical experts in the scientificfield but have money to invest in high risk start-up businesseswhere successful development brings a high financial return. Theyagree to provide some funding for Dion’s project. They do not wantto take an active part in the business other than in providing themoney required and receiving a share of the anticipated profits. Ifthe project fails, Iosefina, Rosa and Michelle do not want anyfurther liability in addition to the money they have alreadyprovided. They also wish to keep their involvement in the projectsecret. 2. Explain two ways in which joint venturers could ensure theydo not form a partnership.3. Compare the use of a partnership and a company as thebusiness form for SMEs when new capital is introduced.