Business Structures: Types and Impact

This assignment delves into the diverse world of business structures, examining different types such as corporations, partnerships, and sole proprietorships. It analyzes the unique characteristics, strengths, and weaknesses of each structure, highlighting their impact on innovation and regional economic growth. The focus also extends to the role of clustering in fostering business development and the influence of cultural factors on business success within specific regions.

CORPORATIONS OF
BUSINESS STRUCTURES

Table of Contents
INTRODUCTION...........................................................................................................................1
PART A...........................................................................................................................................1
Business structures and comparison of administrative costs and burdens.............................1
PART B ...........................................................................................................................................3
Comparison of the liability of the individuals and the liability of the partners......................3
PART C3..........................................................................................................................................4
Duties owned by partners and duties owned by directors......................................................4
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
It is important for Business to have appropriate structure in order to achieve better growth
and success. The below report explores the legal structures of businesses. It is important for a
business to have an appropriate legal structure in place, in order to achieve set growth and
development. The reports highlight three main legal structures of a business which are sole
traders, partnerships and propriety companies 1 . It explains the advantages and disadvantages of
these legal structures and what role they play within a business. Along with it, the report
compares the liability of the partners and the liability of the individuals working under these
structures.
PART A
Business structures and comparison of administrative costs and burdens
It is important for a business to have appropriate structure in place. It affects how much a
company pay in taxes and its ability to raise money. The paperwork required in the file and the
personal liability. Below mentioned are the important business structures: Sole proprietorship: A sole proprietorship is one of the easiest form and provides
complete control of the business to its owners. A business is automatically considered as
sole proprietorship if the business activities are being done by a single person. Only a
single person is held personally liable for the sole proprietorship business. In order to
achieve better growth and results, the sole trader is the only person responsible for this.
The administrative costs of the sole proprietorship includes the salaries of the individuals
working for the company. These salaries are provided from the profits earned by the
company2 . The other administrative costs includes expenses required by the business
operations. These costs are the important ones and each and every sole proprietorship
business has to be a part of these costs in order to ensure better provision of the services.
Also, expenses arising from the business, cost of maintaining of home office, self
employment costs and intangible costs are some important administrative expenses
1 Epifanova, T. V., Skvortsova, T. A. and Parshina, E. A., 2017. Influence of clustering on
innovational development of business structures in region's economy. International
Journal of Trade and Global Markets. 10(2-3). pp.133-141.
2 Jennings, S., Sahan, E. and Maitland, A., 2018. Fair Value: Case studies of business
structures for a more equitable distribution of value in food supply chains.
1

required while setting up the business. The administrative burdens of the sole
proprietorship includes unintended risks, the issues faced by companies because of the
changing policies of the government and the fluctuations in the costs. These all burdens
makes it difficult for the company to thrive and ensure its operations properly. Partnerships: The partnership structure is also known as one of the simplest structure in
which two or more people are known to own a business together. Two common types of
partnership are there which are limited liability partnerships and the limited partnerships.
The limited partnerships in general have only one partnership with a liability that is
unlimited and all other partners have liability that is limited. The partners with a limited
liability also have limited control over the business. This is documented in partnership
agreement. In this system, the profits are passed through to personal returns of tax and the
general partners without the limited liability also requires paying the taxes of self
employment 3 . The administrative costs of the partnership firms are the salaries of both
of the partners, salaries and wages of the people working for the business, the extra
expenses incurred while running the activities of the business smoothly. These all costs
are provided by the profits earned from the business. The administrative burden of the
partnership includes the salaries of the partners, office rent, staff salaries, overhead
expenses etc.
 Proprietary Companies: The proprietary companies are the form of privately held
company which is either unlimited or limited. Unlike a public company, there are
restrictions, jurisdictions on what it cannot and can do. A proprietary company does not
offer any sort of public shares and as with the other structures of business, a proprietary
company have a separate legal entity with its own liability of tax. A proprietary company
is limited to sell its shares to 50 shareholders whereas the partnerships is limited to 20
shareholders.
The administrative cost of the proprietary companies includes insurance of the business.
It is important for a business to have appropriate insurance in place in order to ensure that the
activities of the business are ensured. The other administrative expenses of the business includes
its executive benefits and wages. In order to provide the appropriate salaries to its employees
3 Mackie, J., 2018. Business success among Southeast Asian Chinese: the role of culture,
values, and social structures. In Market Cultures (pp. 129-144). Routledge.
2

which are working in the organization, the profits are the major requirements of the proprietary
companies. Along with it, the accounting staff salaries and the legal council are the other
administrative costs of the business. The administrative burdens of the proprietary companies
includes provision of salaries to the staff members, directors and the management working in the
organization. The other burdens include paying of expenses of the office, overhead expenses etc.
PART B
Comparison of the liability of the individuals and the liability of the partners in a proprietary
company
It is important for a business to reach new level of success and growth. It is done by
earning profits. Organizations often make use of strategies such as entering into joint ventures to
ensure their business is growing. Below mentioned as what will be the liability of the partners
and the liabilities of the individuals is going to be while entering into contract with outside
parties in joint venture business.
During entering the contracts the outside parties, it is important for the business or the
individuals involved in it to reach higher level of development. The individual responsibility is to
take every action in order to ensure that the required growth is being achieved within the
business and none of the partners and the individuals of the business have to face any issues.
In a proprietary company, it is important for the business to make use of a variety of
knowledge and skills in order to achieve its set growth and development. Along with it, the first
and the foremost priority of business is to achieve good growth and development. In order to do
this, the partners of the business often makes use of a variety of ideas, particular skill set etc. to
ensure better growth and development. It is important that they are constantly brought up with
new challenges and new growth prospects. It is important for the partnership company to have
skilled partners in place in order to achieve set growth and development. The liabilities of the
partners working under the proprietary company are a lot. It is important for these partners to
have such set of skills from which they can teach and train their employees. Also, it is important
for the partners to ensure that they are having the right skills in order to achieve required growth
and development 4. This is a liability on the partners of the business that they need to acquire a
4 McMorrow, J. A., 2015. UK Alternative Business Structures for Legal Practice: Emerging
Models and Lessons for the US. Geo. J. Int'l L.. 47. p.665.
3

set of skills to ensure that their employees are being trained with the right set of skills and
development opportunities.
The other liability which the partners to the liability of individuals have to face in the
proprietary company is that each and every partner has to severally or jointly liable for all the
acts of the being done while being a partner. It is because of this liability, the firm creditor can
sue all of its partners individually or jointly. The liability of the firm for the bad utilization by its
partners is another liability faced by the business. In times, when a partner of the business acts
within the partner's apparent authority tends to receive money or the property from a third party
in the business course. The liability of the retiring partner is liable for the acts of the firm which
is done before the retirement. But a retiring partner is not going to be liable for the incurred debts
before the partners retirement when an agreement is reached between the third party and the
partners.
An individual in the business involved often have to face a lot of things as his actions
often create situations in which the business see fluctuations of growth and suffering both. These
actions taken by the partner often make the business face issues of loss and lack of profitability.
It is important for the individual only to make use of the right practices in order ensure required
growth and development. The individual is the one who is responsible to take the business
further. Along with it, it is the individuals only responsibility to ensure that desired growth is
being achieved within the business. The individual has to face the losses alone and the
individuals is the only one which is responsible to take the business further.
PART C
Duties owned by partners and duties owned by directors
Below mentioned are the duties own by the partners and the directors of the businesses:
 Sole trader: The sole trader of the company is the sole person who is not having any
other partners in the business. The duties of the sole trader in the business is to
understand the business and its activities carefully. Having the right knowledge of
business and its activities helps the sole trader to reach to the required growth as per the
set potential and achieve respective profits in the business. The other important aspect for
the business is to achieve profits.
1. The sole trader is responsible order to understand in what manner they can earn profits in
the business to achieve required growth and development and to ensure better growth. It
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is important for the business to reach new level of development and ensure that desired
growth is being achieved.
2. The sole trader than being the director of the company requires making use of appropriate
strategies and train themselves in such manner that the set of skills and knowledge are
helping the business to reach new level of growth and development 5 .
3. It is important for the sole trader to make use of new development aspects as well. As
being a director, the sole trader takes counseling of other people in order to help him in
ensure the achievement of new growth and development for the business.
 Partnerships: In partnerships the partners are the ones which are responsible for making
of the decisions and ensuring better growth and development. In order to do this, the
partners of the business often makes use of a variety of strategies and development
frameworks to achieve required growth and success.
1. The duties of the partners which are also the directors of the company to each-other
includes to act in the utmost faith to the partnership and to the other partners.
2. The other duties of the partners as being the directors includes not making personal profit
from the trust which is placed in them by other partners of the business. It can help the
other partners to work with the equanimity and ensure that desired goals is achieved
within the business.
3. The other important aspect is to place themselves in such position where their own
interests are not conflicting with the duties of the partners . Along with it, it is important
for the partners to account for and pay for the firm such profits which are made by the
business in order to compete with the business of partnership, to the other partners and
the representatives as well.
 Proprietary Companies: The duties of the partners and the directors of the company in
proprietary companies are often shared between in order to ensure set growth and
development. It is important for the organization to reach new development and growth.
1. The partners working in the organization has to make use of a variety of development
options and requires maintaining a good communication to ensure this. The director of
5 Mukai, T. and Terano, T., 2018. Effects of trade environment in decentralized inter-
organizational business structures through agent simulation. Journal of Advanced
Computational Intelligence and Intelligent Informatics. 22(6). pp.933-942.
5

the proprietary companies has to provide the right directions to the managers and
employees working in the organization in order to ensure required growth and
development.
2. Along with it, the partner needs to observe at what places the organization is lacking
growth and development and what is making it reach new level of success. As per these
factors, it is important for the director to guide its employees accordingly and ensure
required growth and development.
3. It is important that the director tends to provide effective training and development
opportunities to the employees with the right motivation in order to ensure that the
functioning of the business is smooth and effective 6. This helps the business to reach
new level of success and ensure better growth and development. The director is also
responsible to make required decisions at the times needed and ensure better growth and
satisfaction.
As per the above evaluations, the best structure for the business is sole proprietorship. It provides
a better freedom for the individual to operate the business on set terms and conditions and ensure
better growth and development.
PART D
Notes for Video
Client has been given recommendation to establish sole proprietorship firm, as it will
enable them to have complete control on business activities. The other suggestion given to client
is that they should follow all the laws and they should be quite careful while deciding the name
of organization. It has also been recommended to client that they should get their organisation
registered with register. I have suggested the list of documents which client is required to submit
such as memorandum as well as article of association in order to get their firm registered. I have
informed the client with their duties as a director of sole proprietor business. By analysing the
suggestion given by me related to the establishment of sole proprietorship form client has
responded in positive manner. They have appreciated for providing the good advice as well as
valuable information related to establishment of sole proprietor business. I have informed clients
about the legal requirements which are required to be fulfilled by them in order to set up sole
6 Roberts, J., 2018. Multinational business service firms: development of multinational
organization structures in the UK business service sector. Routledge.
6

proprietor business. I provided therm with detail explanation about the companies' law which
they are required to follow while establishing the business. Before I gave the suggestions the
client has decided to establish the partnership business which I considered to be as poor decision.
By performing the interview procedure I have improved my communication skills. I leaned about
the way an individual can satisfied the client by answering their questions in an appropriate
manner. I have learned that an effective listening as well as analytical skill is very much essential
in order to develop understand the answers provided by interviewee. I have gained the practical
experience in context of interviewing which I believe that will assist me in conducting interviews
in the future.
CONCLUSION
The above report explores the importance of business structures within a business. As per
the findings it has been concluded as the sole proprietor is the kind of business structure where
only a single person is responsible for the activities of the business. The partnership business
requires one or more people to be a part of the business. It is important in partnership that each
and every partner is provided with the right set of property and profits. The report has also
concluded the roles and responsibilities of the people and the directors of the businesses. It has
showcased the importance of all of these businesses and measures needs to be undertaken before
starting any of such businesses as well.
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REFERENCES
Books and Journals
Epifanova, T. V., Skvortsova, T. A. and Parshina, E. A., 2017. Influence of clustering on
innovational development of business structures in region's economy. International
Journal of Trade and Global Markets. 10(2-3). pp.133-141.]
Jennings, S., Sahan, E. and Maitland, A., 2018. Fair Value: Case studies of business structures
for a more equitable distribution of value in food supply chains.
Mackie, J., 2018. Business success among Southeast Asian Chinese: the role of culture, values,
and social structures. In Market Cultures (pp. 129-144). Routledge.
McMorrow, J. A., 2015. UK Alternative Business Structures for Legal Practice: Emerging
Models and Lessons for the US. Geo. J. Int'l L.. 47. p.665.
Mukai, T. and Terano, T., 2018. Effects of trade environment in decentralized inter-
organizational business structures through agent simulation. Journal of Advanced
Computational Intelligence and Intelligent Informatics. 22(6). pp.933-942.
Roberts, J., 2018. Multinational business service firms: development of multinational
organization structures in the UK business service sector. Routledge.
8