There are four major forms of business organization. They are sole proprietorship, partnership, corporation, and Limited Liability Company. These business organizational forms affect how one is taxed, their legal liability, the costs of formation, and the operational costs. Sole proprietorship involves owning a business as single person for their own benefits. A partnership involves two or more owners of a business thorough their investments in the business. There are general and limited partnerships. Limited Liability Company is a form of business organization that incorporates elements of partnerships and corporations (Nandini, 2019). The most appropriate form of business organization for Carla will be sole proprietorship. This will be effective because she will be investing only her own money in the Carla’s Pets Store and therefore, she will be the only one liable for any gains and losses in the business.
Sole proprietorship is a form of business organization where a business or company is solely owned, managed and controlled by one person, who is responsible for capital provision and bearing of the business risk that may arise. Characteristics of sole proprietorship includes single ownership, less legal formalities, no separate entity, unlimited liability and no sharing of loss and profits in the business (Nandini, 2019). In Sole proprietorship, investment and provision of capital is done by only one person who is the owner of the business and manages all the operations required in the company or business. It also does not involve any form of legal formalities. The profit gained from the business is fully acquired by the owner, and the losses and debts in the business are also the owner’s liabilities.
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Sole proprietorship is easy to form because it requires no legal formalities. This is one of its advantages. Additionally, quick decisions and actions can be made in the business in the case of any problems that arise, because the sole owner decides on what to do with their investments and no one can interfere with it. Besides, operational flexibility is also a pro in sole proprietorship, where change can easily be incorporated in the business without the involvement of many formalities. Sole proprietorship also allows direct motivation where the owner receives all the profits and gains acquired from the company, and can decide to use it in any way they want. The cons of Sole proprietorship includes limited resources, where the capital and other resources to start the business and manage it might not be enough (Regoli, 2017). Besides, the business operations can be stopped or slowed down due to the uncertainties like sickness or death of the owner. There I also unlimited liability where the owner’s property and money can be used to pay off debts in the business.
If Carla wants to obtain additional capital to expand the business, but does not want to lose control of the company, the best option is to incorporate the business organizational form of Limited liability Partnership. This is a form of business partnership where one partner has all the control and power in the business, and most of the liability and the other partners are not involved even though they have a financial share in the business. As the name suggests, LLP involves limited sharing of liabilities in the case of losses and debts in the business. Despite this kind of partnership being hard to create due to rules, regulations and legal formalities required, it will enable Carla retain control over her business. This is because, a Limited Liability Partnership is a body corporate and legal entity, separate from its partners or stalk holders. Carla will not be liable for acts, omissions or mistakes made by another partner, but only for her employee, Quimby and Ruth.
References
Apa Practice Organization. (n.d). Choosing the Best Legal Structure for Your Professional Practice. https://www.apaservices.org/practice/good-practice/legal-structure.pdf
Nandini, G. (2019, July 10). Forms of Business Organisation . https://www.economicsdiscussion.net/organisation/forms-of-business-organisation/31599 .
Regoli. N. (2017, January 14). 10 Advantages and Disadvantages of Sole Proprietorship. https://connectusfund.org/10-advantages-and-disadvantages-of-sole-proprietorship .
