Entrepreneurial Finance: Possible Business Structures and Recommendations

This report discusses the possible business structures for a food truck business and recommends the partnership form of business. It also covers the advantages and disadvantages of different business structures, management and resource considerations, responsibilities, intellectual property protection, sources of finance, various stages of growth, and financial performance measurement.

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ntrepreneurial inanceE F
Report
8/29/2018
Student ameN

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Table of Contents
Introduction................................................................................................................................2
Possible Business Structures......................................................................................................3
Partnership..............................................................................................................................3
Advantages..........................................................................................................................3
Disadvantages.....................................................................................................................3
Company.................................................................................................................................4
Advantages..........................................................................................................................4
Disadvantages.....................................................................................................................5
Sole proprietorship.................................................................................................................5
Advantages..........................................................................................................................5
Disadvantages.....................................................................................................................6
Not for profit making..............................................................................................................6
Trust........................................................................................................................................6
Joint Venture..........................................................................................................................6
Comparison of a different form of business structure................................................................7
Recommendation....................................................................................................................7
Management and resource consideration...................................................................................8
Responsibilities.......................................................................................................................8
Intellectual Property protection..................................................................................................9
Sources of finance......................................................................................................................9
Various stages of growth..........................................................................................................11
Financial performance measurement.......................................................................................12
Recommendations....................................................................................................................12
Conclusion................................................................................................................................13
References................................................................................................................................15

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Appendices...............................................................................................................................18

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Introduction
Social entrepreneurship or entrepreneurial activities are found at the peak in the recent years.
The entrepreneurs are considered the lifeblood of the economy. The entrepreneur has the
fundamental agent in most of the production, distribution, and growth theories. Entrepreneurs
are considered national assets, which is to be refined, motivated, and remunerated to the
greatest possible extent. There is a various comparative analysis done by the entrepreneurs
are done to evaluate the market success, failure, mission, objectives which will be there in the
business (mccarthy, 2016).
The resource allocation and performance measurement are done by the entrepreneurs to
know the financial position and funding that will require in the business. Other decisions are
also taken by the entrepreneurs, which include a decision regarding the compensation of staff,
rent expenses given by the owner, and other expenses. Additionally, the various financial and
non-financial stakeholders are working as social entrepreneurial. These are accountable to the
society and are greater in number, which is varied in nature. This will result in greater
complexity in managing the relationship (Wolfe and Nix, 2016).
There are various type of business structure to which the business can be started which
includes sole proprietorship, partnership, company, joint ventures, not for profit making, trust
etc. The entrepreneurs have the varied ideas and strategies to implement in the business and
create the value addition in the product or services provided (Benington and Geddes, 2013).
The product offered by business is in a food truck with a wide variety of foods in the truck to
satisfy the customer at most. Food is the requirement of every person in the world, so its
demand always find on peak in the market. The only way to survive in the market is to create
add on value for the customers. Benefit is an important tactic used by the entrepreneurs to
retain the customer for the long term. The food chain will provide their services in various
parts of the region, as it is movable in nature and can move from one place to another
(Paranque and Willmott, 2014). The business is targeting the every age group in the
community by offering the variety of food products in the market. This variety of food
mainly includes the Belgian Fries, Italian Soda, and Signature Packaged Sauces by the
business.

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The structure of the business is found to be hierarchical in nature by the p[partnership form of
business so that the information must be received by the top level management that is the
owners of the business and then pass on to the workers and other persons.
Possible Business Structures
Partnership
A partnership form of business is one of the most common forms of business to run a
business in Australia.
Advantages
Easy formation
The partnership firm can be easily formed by the members. There are very less formal with
fewer legal obligations in starting up the partnership form of business.
Shared responsibility
Partners share the responsibilities of running the business. This will allow them to make most
of their abilities. The partners will have the equal responsibilities and authorities in the
business due to the equal share in the business until and unless stated in the partnership deed.
Sin partnership, partners distribute their work according to their capabilities and knowledge
(Porter, 2014). One of the partners has the accounting skills so all the bookkeeping work will
be done by that partner. Other may have skills for sales and therefore will be a salesperson in
business (Grant, 2016).
Less formal with fewer legal formalities
Partnership form of business has the less formality in form of legal issues. The formation and
winding up of the firm can be done easily without any formalities. The partnership form of
business can is started when two or more persons come together for a common purpose and
can wind up existing firm when any partner leave the firm and can enter into the new firm if
they want (Bubb, 2014).
Privacy
Compared to a limited company, the affairs of the partnership business can be kept
confidential by the partners. They are not required to share the information with anyone

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except their partners. The disclosure of each and every accounts and information in public is
not compulsory in case of partnership firm (Nordqvist, Sharma and Chirico, 2014).
Disadvantages
Unlimited Liability
Ordinary Partnership form of business has the unlimited liability, which means their personal
assets can be affected. In the partnership form of business, the partners are equally and jointly
liable for the losses and profits did in the organization. If one partner get insolvent, others
collaborates will be liable to pay the debts (Iyer, 2013).
Limited access to capital
In partnership form of business, the owners have the limited capital in their businesses the
sources of funds are only two that is the owner’s capital and loan taken by the partners from
any financial institution. They do not have the right like company have to call the money
from the public. A partnership firm cannot issue shares as a company form of business do
(Cheney et al., 2018).
Company
A company form of business is a more complex business structure. This structure has certain
rights, privileges, and responsibilities available to the members, shareholders. Company form
of business can also opt for the new business but it has its own advantages and disadvantages
which are as follows:
Advantages
Limited Liability
In company form of business, shareholders have the limited liability up to the share taken by
theme in the company. Their personal assets will not get affected in case of dissolution. The
number of shares taken by them will only be their liability to pay for the company.
Continuity of Existence
In a company, members may come and members may go but the company goes on forever.
This means that the company’s existence will not be dissolved if their members leave the
organization.
Issue and Transferability of Shares

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The shares can be issued only in company form of business only and can have the large funds
from the public only. The shares are also transferable in nature that means they can be given
to anyone when he is in need of money (Dijkman et al., 2015).
Disadvantages
Difficulty of formation
Promotion of a company is not an easy task. There are numerous stages involved in the
formation of a company. A lot of legal formalities are required to perform at the time of
registration. The formation of the company form of business is risky as well as expensive.
Ownership and Management
In a company form of business, both ownership and management are differing from each
other. As all the managerial rights are with the directors of the company whereas, all the
ownership is with the shareholders of the company. In a company, the management and
ownership are separated from each other (Means, 2017).
Delay in decision-making
In a company form of business, the decision-making process will be delayed in the
organization due to the numerous levels in the management. All the decision will be made by
concerning all the level in the organization. This makes the decision-making process slow in
the company. No urgent decision will be taken in the company form of business.
Sole proprietorship
A sole proprietorship is the form of business in which a single person has the all the liabilities
and responsibilities of the business. All the profits and losses in the business area of the sole
owner only. This form of business has its own advantages and disadvantages which are as
follows:
Advantages
Ease of formation and dissolution
The sole trader business can be easily started up with the will and wish of the owner and he
has the right time to wind up his business. There are no legal interferences in day-to-day
business affairs (Janes, 2017).

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Fast decision-making
The sole owner has the capability to make the faster decision in the organization. The
decisions making in a sole proprietorship is fast due to the availability of sing person to
decide in the business what decision to take or not (CFI, 2018).
Disadvantages
Limited capital
In sole proprietorship, there is a lack of capital in the business due to the single owner. The
funds invested in this type of business are limited to an extent.
Unlimited Liability
In sole trader, the liability is unlimited. Not only had the assets of the business but also the
private property of the owner gets affected to pay the debts of the firm. Unlimited liability in
the business also discourages the expansion of the firm.
Not for profit making
In this type of structure, the business is done for the welfare of the society and not for earning
the profits out of it. This form of business is suitable in case of a person doing the work for
the social motive and he has no intention to earn any type of profit from the business.
Running of a food truck is a profit-oriented business in which expansion is possible in the
business when they are earning profits out of business (Kerzner and Kerzner, 2017).
Trust
A trust is a relationship where a trustee (can be an individual or a company) carries on
business for the benefit of other people (the beneficiaries). Trust may carry on the business
for the benefits of a particular family and distribute the yearly profit to them. A trust is not a
separate legal entity.
Joint Venture
Another form of business structure, which the owner can use in entering into the form of
business, is a joint venture. In this type of business, the pool of resources is done by the
parties to have the large funds in the business. This is done to achieve the common purpose of
the business. The joint venture is usually done for the new project or nay other business
activity. In the food truck business, this can be also a suitable form of business to start the
business (Andriof et al., 2017).

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Comparison of a different form of business structure
Sole Proprietorship Partnership Company
Owner Sole Partners Shareholders
Number of owners/
shareholders
01 Min: 2, Max: 20 Min: 7 members, Max:
No limit
Min: 2 Max: 50 in
case of PVT Ltd.
Management control Proprietor Partners Board of Directors
Liability Unlimited Unlimited Limited
Legal Registration No provision Voluntary Compulsory
Flexibility Maximum Depends on partners Comparatively less
Source of Funds Owner’s capital
(proprietor brings in
the funds)
Partners bring the
funds
Shareholders bring the
funds
Recommendation
From the above discussion, it can be concluded that the most suitable structure for starting a
business in the food chain is the partnership form of business. This structure is found suitable
among all the available because of its nature and size of business. This structure will be found
suitable for the food chain business, which is going to be started by the partners. The
partnership firm has to get its name registered without that the name can be copied by another
person. The name for the partnership in food truck business will be Mistry. The business will
deal with providing the fast food to their customer. They use the concept of a food truck in
their business so that they can move from one place to another and provide food to a large
region of the country like Australia. This form of business is suitable due to the fewer
requirements of funds and the risks of the partner will be shared by all partners jointly and

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severally. The partnership firm have to face few legal requirements in the eyes of law. There
is no compulsion to register the firm. Without registration, the firm and its partners can also
work. Therefore, to start up a partnership firm, less capital is required. Another advantage
that the partnership firm enjoys is the tax liability. The tax liability is only on the share of
partnership income on the personal returns earned by the partners. However, written formal
agreements between the partners called partnership deed will be made by the partners. This
made the clarity in the role and responsibilities of the partners and their profit sharing ratio
(Caplow, 2017).
Management and resource consideration
In managing the partnership numerous things taken into consideration by the partners, who
include creating the partnership norms, designing the structure for the open and honest
communication, creating the collaborative work plans in the business. Lastly implementing
evaluation and monitoring strategies in the firm.
The management in the partnership form of business is done by the partners with their mutual
consent. All the decision-making in the partnership form of business is done by the partners
of the firm. The partners have the equal right to participate in the management and decision
making of the business until and unless stated in the partnership deed or decided by the
partners. The management process in the partnership form of business is done by the partners
by distributing the work in the firm according to their capabilities and knowledge. For say, if
a partner has the knowledge of accounts then he will be responsible for the entire
bookkeeping work in the firm. Other partner groomed in the sales and marketing skills, then
he will be doing the work of promotion and advertisement in the market (Greenwood and
Miller, 2010). The resources in the partnership firm are arranged by the partners only. All
partners will bring up the capital or they have the option to take the loan from any financial
institution.
The business needs to have the resources, which includes the stores and supplies, equipment
and machinery, which cost to around $2, 50,000. In addition, the business has to give the
wages to its labour on monthly basis (Refer Appendix 1).
Responsibilities
The responsibilities in the partnership firm are found to be equal to all the partners. The
following are the responsibilities towards duties, government and others are as follows:

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Record Keeping and Duties
Every partner’s shares equally in the responsibilities of maintaining the financial records and
ensuring the partnership maintain its appropriate licensees to equally contribute to the
business. All the keeping of the information is done by the partners only.
Paying Business taxes
In the business of partnership firm tax liabilities arises to all the partners. The responsibility
to pay federal and state income taxes rests equally with each business partner regardless of
managerial role.
Liabilities and debts
In partnership form of business, each partner are responsible for the all the debts of the
business. In setting up of debts, partners personal assets may get affected, if the partnership
fails to meet the obligations of the business. However, by forming a limited liability
partnership by the partner, risk can be mitigated by each personal responsibility for business
debts (Bäckstrand, 2008).
Intellectual Property protection
Intellectual property protection is protection for inventions, symbols, names, and images
which are created in the mind. This can be protected by using the copyrights, patents,
trademarks, and trade secrets in the business. In this partnership of food chain, the partners
can make use of the patents so that no any other person can copy their idea or theme of the
business (Weber, Alfen and Staub-Bisang, 2016). The protection of the website domain is
available in the partnership form of business. Mistry will be the name of the firm which the
firm needs to be registered under the law.
Sources of finance
Finance is considered the lifeblood of the business. Finance is needed to start up the business
without this the business cannot be started. There are two types of finance available in
starting up a business, which is the equity financing or debt financing. Availability of finance
has its advantages and disadvantages in the business. Application of both the funds will
somewhat risky and profitable too. The financial needs will depend on the size and nature of
the organization. The operation level will depict the finance requirement of the business. If

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the business needs regular funds in the capital then the business will require more funds as
compared to the business, which required fixed capital (Polzin, Flotow, and Klerkx, 2016).
In the business of food chain store, the business requires a regular flow of funds to operate in
the market and continuing supplying their product to its customers. Debt and finance are two
sources of finance. Government grants to finance certain aspects of business may be an
option in the form of subsidies or exemption in taxes for first five years in the business
(Miglietta and Battisti, 2016).
Equity Financing
Equity refers to the exchanging a portion of ownership of the business for a financial
investment in the business.
Personal Savings
Personal savings are the funds, which are taken by the partner itself from its own in the form
of capital. Depending on the partnership agreement, each partner will have to contribute an
equal amount to start the business.
Angel investors
Angel Investors is the new form of finance in which the business investment is done by the
third party. This investment is done with the aim to help in sustaining and growing the small
business in the region. They are focused on the profitability statement of the company and the
security of their funds if they like the proposal of business; they invested their money in the
business. Partnership in food truck can opt for the angel investor (Khmel and Zhao, 2016).
Debt financing
Debt financing is taking the money from creditors with the stipulation of repaying the
borrowed funds plus interest at the specified future time. This source may be secured or
unsecured source of funds. Partners can take a loan from the bank and other financial
institution. Other option partners have is to take the loan from one of the partners who has
surplus funds. However, in debt form of funds, the payment of interest is mandatory, as it is
the liability of the firm or partners to pay (Semerád, Radvan, and Bartůňková, 2016).
In this partnership, the partners will bring their capital in an equal ratio that is 1:1:1 and each
partner will contribute $50000 to business. The partners have the equal liability and

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responsibility in the business. Partners will take a loan of $100000 from bank @ 10%. This
amount will be sufficient to start up the business of food truck chain (Gupta, Pistorius and
Vijge, 2016).
Various stages of growth
In a partnership with food chain business, there can be five stages, which include the launch,
growth, shakeout, maturity, and decline. In the first phase, business requires the funds to
manage the resources to start the business. These resources include a place where partners are
providing their services, resources needed to make the food, labor salary, and property rights
so that no one copy the name of the business. The sales have been increasing which can be
analysed from the sales forecast given in the appendix (Refer Appendix 2). All the promotion
activities are done in this stage only so that the people come to know about the new service in
the market (Chkanikova and Lehner, 2015).
(CFI, 2018)

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In the second stage, growth will expect in the business. From this stage, business starts
earning profits and sales will increase. The finance is needed at this stage to have available
resources in the business and the demands of the customer are fulfilled (Ashkenas, Ulrich,
Jick, and Kerr, 2015).
After this stage, business will explore in the market and there will be requirements of huge
funds to run the business. At this time, business will need more working capital in its
business to meet the regular expenses of the business. The profits and sales will show an
upward trend in these two phases (Kondoh, 2015).
The last stage in the cycle is related to the declining stage of the business. Both profits and
sales will move downwards due to the availability of substitute in the market. To recover
from this phase, business should start innovative in the existing business. This makes the
business revive and the customer will continue to be the contributor in high profit and sales.
For the revival of the business, the requirement of funds will be there (Haugh, 2005).
Financial performance measurement
The financial performance of a firm can be measured by seeing the sales and profitability of
the business. The financial performance in small business can be measured by analyzing the
profits, inflows, and outflows of cash, market valuation of business and goodwill of the firm.
Food truck business aims to have high sales throughout the year and expect 10% of the
profits (Knai et al., 2015). The most important area in any form of business is the profitability
criteria. The financial performance in the partnership form of business can be measured by
the amount of profits earned by partners.
From the Appendices, it can be analysed that the Mistry can able to earn the profit in first
year, which will gradually increase in next two years (Refer Appendix 3).
Recommendations
The possible opportunities that partners have in the partnership form of business are sharing
of responsibilities and work. There will be a mutual support and motivation in the partnership
form of business. In partnership, partners enjoy the benefit of spreading the risk, which will
definitely enhance the business during both the start-up and growth phases (Negi and Anand,
2015). The risk of investment will spread in all the partners equally as decided in the
partnership deed. In starting the venture, the opportunities is that the business will grow in the

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future and make lots of profit. This will enhance the business and help to grow in the market.
From this profitability in the business, partners will also able to earn the profits in the long
term.
The risk associated with starting up the business in partnership is the insolvency of
partnership firm or partners. From this, all the liability will be pay by the remaining solvent
partners. The biggest risk in starting the partnership is that the personal assets of the partners
will also get affected when the firm assets are unable to pay the firm’s debt. This factor will
be considered as the biggest threat to the partnership of business. In starting the food chain,
the risk might arise in case of serving the good quality food to its customers. If the Mistry
will unable to give the quality food and good service experience to their customer, it will
spoil their image in the market which leads to low sales and profitability and ultimately leads
to the insolvency of the firm.
In partnership, partners do not have total control over the business. Decisions are shared and
sometimes business faces the difference in opinion and can disagreements. This will hamper
the performance of the business and may lead to dissolution. The firm will face difficulty in
arranging the funds for the business. The arrangement of the funds (Woerner and Wixom,
2015).
Conclusion
From the above discussion, it can be concluded that the entrepreneurs are the lifeblood of the
economy. Entrepreneurs contribute to the economic growth of the country. Without them, the
new innovative idea will not be generated in the society. For starting up the new venture,
entrepreneurs develop the management funding through various stages of growth and finance.
There are many options available to an entrepreneur to start up their venture. This form of
business includes partnership, company, not for profit organization, trust, joint venture, sole
proprietorship and others. All the forms of business have its own advantages and
disadvantages. In this business plan, there are three people and the partnership form of
business is found suitable for them. The business will deal with providing the fast food to
their customer. They use the concept of a food truck in their business so that they can move
from one place to another and provide food to a large region of the country like Australia.
This partnership is going to be started with a name of Mistry and each partner will share the
profits and losses equally. Each partner will contribute an equal amount, as there capital and

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the business will take a loan from a financial institution to start the business. All the resources
and responsibilities are shared by each of the partner severally and jointly in the business.
The business will face growth stages while managing their finance. The business
performance is measured in terms of their sales and profits margins by the partners. The
decision-making in the business will be done on the mutual consent by each of the partner.
This business is associated with risk and opportunities, which are managed by the partners.

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19 | P a g e ntrepreneurial inanceE F
Appendices
Appendix 1
Resource Requirements
Resource Amount ($)
Stores and Supplies 50,000.00
Equipment & Machinery 2,00,000.00
Labour (3workers*$3,000) 9,000.00
Working capital 1,00,000.00
Total 3,59,000.00
Appendix 2
SALES FORECAST
YEAR 1 YEAR 2 YEAR 3
Unit Sales
Belgian Fries 40,464 90,928 1,98,856
Italian Soda 37,692 65,384 1,20,768
Merchandising 2,889 6,778 12,356
Signature Packaged Sauces 4,356 5,712 10,425
TOTAL UNIT SALES 84,401 1,68,802 3,37,605
Unit Prices Year 1 Year 2 Year 3
Belgian Fries $6.00 $6.00 $6.00
Italian Soda $2.50 $2.50 $1.50
Merchandising $8.50 $8.50 $8.50
Signature Packaged Sauces $2.00 $2.00 $2.00
Sales
Belgian Fries $197,856 $395,712 $791,424
Italian Soda $41,538 $83,076 $166,152
Merchandising $33,057 $66,114 $132,228
Signature Packaged Sauces $6,712 $13,425 $26,849
TOTAL SALES $279,163 $558,327 $1,116,654
Direct Unit Costs Year 1 Year 2 Year 3

20 | P a g e ntrepreneurial inanceE F
Belgian Fries $0.80 $0.80 $0.80
Italian Soda $0.15 $0.15 $0.15
Merchandising $3.83 $3.83 $3.83
Signature Packaged Sauces $1.00 $1.00 $1.00
Direct Cost of Sales
Belgian Fries $39,571 $79,142 $158,285
Italian Soda $4,154 $8,308 $16,615
Merchandising $14,876 $29,751 $59,503
Signature Packaged Sauces $3,356 $6,712 $13,425
Subtotal Direct Cost of
Sales
$61,957 $123,914 $247,827
Appendix 3
Mistry
Profit & Loss Statement
Amount ($)
2018 2019 2020
Sales 2,79,163 5,58,327 11,16,654
A. Total $ 2,79,163.00 5,58,327 11,16,654
B. Cost of Sales $ 61,957.00 1,23,914 2,47,827
C. Gross Profit (A-B) 217206 434413 868827
D. Operating Expenses
Wages $9,000 $9,900 $10,890
Stores and Supplies $50,000 $55,000 $60,500
Insurance $500 $550 $605
Depreciation $20,000 $22,000 $24,200
Marketing $10,000 $11,000 $12,100
Maintenance & Repairs $5,000 $5,500 $6,050
Other $2,500 $2,750 $3,025
Total $97,000 $1,06,700 $1,17,370

21 | P a g e ntrepreneurial inanceE F
Operating profit $1,20,206 $1,32,227 $1,45,449
Less: Interest $5,000 $5,500 $6,050
Profit before tax $1,15,206 $1,26,727 $1,39,399
Less: Tax @ 30% $34,562 $38,018 $41,820
Net Profit AT $80,644 $88,709 $97,579
Appendix 4
Mistry
Balance Sheet
Amount ($)
Assets 2018 2019 2020
Current $60,000 $72,000 $80,000
Fixed $2,00,000 $2,00,000 $1,50,000
Other assets
Total Assets $2,60,000 $2,72,000 $2,30,000
Liabilities
Current $3,000 $15,000 $20,000
Non-Current (Borrowings) $1,00,000 $90,000 $60,000
Other liabilities $7,000 $17,000 $20,000
Total Liabilities $1,10,000 $1,22,000 $80,000
Capital $1,50,000 $1,50,000 $1,50,000
Total Liabilities & Equity $2,60,000 $2,72,000 $2,30,000