Choosing the Best Business Structure for a Small Business Venture of Men's Clothing

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Contents
LETTER TO JOHN SMITH...........................................................................................................2
Reference List..................................................................................................................................5

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LETTER TO JOHN SMITH
To,
John Smith
To Council John Smith over the best business structure he should choose to carry on his new
venture of means clothing.
Hello,
I being the accountant of YZ Company have been given the opportunity to enlighten John Smith
over the most apt business structure that he must choose to carry on his small business venture of
men’s clothing.
I would like to submit that there is no single kind of business establishments from which a
person can choose to operate his business. In Australia, there are three prime business forms
which are normally availed by any interested persons, which include either a sole trader ship or a
company or a partnership.
A sole trader ship is the simplest form of business undertaking that can be availed by any person
and does not require any kind of registration or any process for its formation. A single person
who s carries on business and faces all the benefits and consequences of the same is called the
sole trader. He is liable for all the business responsibilities and must cater all the needs of the
business including the capital requirements, tax obligations, etc. (Hunter, 2010)
At this stage, it is advised to John Smith that he is intending to carry on the business at a small
scale dealing with men’s clothing. If he wishes to operate his business by way of a sole trader
then he is the sole care taker of the business and he has to bring in capital and must access to the
risk that is involved in the business. If losses are faced by the business, then, John smith will be
individually accountable for the same.
Thus, I would like to advise that he must not carry on his business by way of a sole trader, rather,
he must choose from the other two kinds of business structures.
Another business structure which was considered to be very popular in Australia is carrying on
the business by way of partnership. A partnership is formed when there are two or more than
two persons who in order to share profits carry on business with common objective. The main
elements of any partnership comprises of: (Sheridan, 2006)
That no partnership can be formed by a single person and thus there must be minimum two
persons who should carry on partnership.
The partners establish the partnership with the sole aim to earn and share profits and losses.
That the business that is established by them is carried with common objective and intention.
That the business is carried on continuous basis.
Now, before advising John Smith whether a partnership would be a suitable business structure
for him or not, I would like to have a brief analysis of a company as a business structure, it is
then both the business structures are compared in order to decide as to which business structure
would be most suitable for him.