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Business

In: Business and Management

Submitted By tushar6593
Words 1362
Pages 6
United States International University – Africa

Individual Term Paper

Name: Tushar Prakash Nainani

ID No.: 640633

Course: BUS 1010 – Introduction to Business Organizations

Schedule: Mondays & Wednesdays 11:00 – 12:40

Professor: P. Gachago

Semester: Fall 2013

Individual Term Paper

Now that you have attended several business lectures at USIU, you decide to start a kiosk business in your estate, selling potatoes.

1) Under what legal form of business would you register your business? 2) Why would you choose that form of business? 3) What, in your view, would make up the supply chain of your business?

Table Of Contents

* Executive Summary Pg. 3 * Question 1 Pg. 4 * Question 2 Pgs. 5-6 * Question 3 Pgs. 7-8 * Conclusion Pg. 9

Executive Summary

The kiosk business would be registered as a sole proprietorship. Since it is a small scale business, not much money is required to start up the business. The owner has full authority over the business and can run it any way they please. Not many legal documents required, only a trading license. The business is very flexible, structure can be changed relatively easily. Not many employees required, maybe one or two at most.

However, if the business goes in debt, the owner is held fully responsible and no one else; although being a small business, the losses won’t be very big. There is also restricted capital investment; not easy to get a loan for a sole trader. Not possible to generate a big revenue since the target customers are very limited. The business would depend on the life span of the owner, since the owner is the only shareholder.

The supply chain of the business would be relatively small as well, in order to save cost of the product; the longer the supply chain, the costlier the product. Supply chain shall consist of only two parties; farmer and owner. They shall come to an agreement in order to supply the vegetables in time. Since the business is dealing with perishable goods, the supply will be high. In order to keep supply flowing, in case of any unforeseeable circumstances, for example if the farmer is not able to supply in time, the owner shall buy land and cultivate their own vegetables.

Question 1
Under what legal form of business would you register your business?
The business would be registered as a sole proprietorship.

A sole proprietorship, also known as sole trader, is the simplest form of business organisation that is owned and run by only one individual and in which there is no legal distinction between the owner and the business. This means that the owner of the business and the business itself, are regarded as one.

The owner of the business receives all profits, and has unlimited responsibility for the losses and debts of the business. Every asset is owned by the proprietor.

Some characteristics of a sole proprietorship are as follows:

1) It is run by only one individual i.e. the owner. 2) Minimal legal requirements for setting up a sole proprietorship. 3) Must have a trading license 4) The owner is fully liable for debts incurred. 5) Ownership and control are combined. 6) The owner and the business are the same entity. 7) Taxes are determined through personal income tax rather than corporation tax.

Question 2
Why would you choose that form of business?
I chose sole proprietorship as it is a small scale business, which does not require a lot of start-up cost. A sole proprietorship also requires minimal legal documents which means that there would be less complications, legally. Since the business has a very small market, a sole proprietorship seemed the most ideal form of business.

Every form of business has its advantages and drawbacks, some of them are listed below:

Advantages 1) Since I am going to be indulging in sole trading, all the decisions will be made by me, which means that less time is consumed in consultation, and I do not have to answer to anyone. I can run the business as I please. 2) I will be able to have close contact with my employees and consumers. This would enable me to easily identify and anticipate customer needs. Since there will be personal contact, relations between the owner (me) and my employees would be better. 3) All the profits made by the business, is mine, as I do not have to share my income with anyone else. While, in other forms of business, profits are shared among shareholders. 4) The initial cost of setup of the business is much less compared to other forms of business. Minimal legal documents are required as well. Hence, less formalities. 5) Due to unavoidable circumstances, if I have to shut down my business, it becomes easy for me to wind up my business, as I am the only shareholder. 6) Since the taxes are determined through my personal income tax, I do not have to fill out a separate form for my business’ taxes. Certain business expenses are also allowable against income tax. 7) No public disclosure of the business accounts is required.

Drawbacks 1) Since I am a sole trader, the entire responsibility of the business’ debts is on me. If the business is unable to pay its liabilities, then business assets can be seized in order to pay off the debts. In some cases, the business assets are not enough to pay the debts, in that case, personal assets can also be seized. 2) There is lack of continuity beyond the owner. For example, if I die, the business would be forced to shut down as I am the only shareholder. This means that the business is very heavily dependent on the life span of the owner. However, in some cases, the next of kin to the owner can run the business, only if agreed by the owner. 3) The owner is responsible for all aspects of the business; finance, marketing, human resource and development. It could get very hard for one person to manage all that by themselves, if they are not skilled enough. 4) Business like a sole proprietorship are restricted to limited capital. Banks do not easily give loans to sole traders, and sources of finance for small scale businesses are very limited.

Question 3

What in your view would make up the supply chain of your business?

A supply chain is a system of organisations, people, activities, information, and resources involved in moving a product or service from supplier to customer.

Since I am the owner of a small business, and my main niche is FMCG (fast movable consumable goods), I would need to have a very short supply chain mainly because I’m dealing with vegetables, and the faster they are delivered to me, the faster I can be able to provide them to the consumers while they stay fresh.

The supply chain would consist of mainly two parties; the farmer and me. The agreement shall be such that the vegetables would be pre ordered by me and shall be delivered to the kiosk every morning. In return, the farmer shall be paid extra as his cost of transportation and delivery. After monitoring the sales for some time, if I am unable to provide my customers with sufficient vegetables in time, I shall buy land and cultivate my own vegetables in order to increase supply, and keep the supply flowing as well, in case the farmer is not able to supply vegetables in time.

Since it is a small scale business, dealing with vegetables, their shelf life is very short. This means that it would not be advisable to have a lot of stock at one time as the vegetables may begin to rot if not sold in time.

Supply Chain

Farmer

Kiosk

Consumer

Conclusion

For a small scale business, I think that a sole proprietorship is the ideal form of business, due to the following reasons:

* The owner has full authority over the business. * Minimal legal documents required. * Low start-up cost. * Profits are not shared, hence, all the profit goes to the owner. * Relatively easy to wind up the business due to any circumstances.

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