Comparing Advantages and Disadvantages of Business Structures

Introduction to Business Law
Comparing the advantages and disadvantages of different
business structures
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Table of Contents
Issue............................................................................................................................................3
Provisions...................................................................................................................................3
Applicability...............................................................................................................................4
Conclusion..................................................................................................................................7
References..................................................................................................................................8
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Issue
Mr X has appropriate funds and wanted to invest in the venture or to initiate a business in
order to get appropriate returns. Further, Mr Y also wants to invest or to join some existing
business to make appropriate profits from existing funds. The issue in the present case is that
both Mr X and Mr Y are confused to take a decision about the business structure with which
they should form their organization. Every business structure has its own pros and con. In
order to resolve the issue a detailed assessment on four structures have been done,i.e. Sole
trader, Partnership, and Company.
Provisions
The main key decision while initiating a business is relating to its structure. The structure of a
business determines the size and type of business and the manner in which the business can
be grown (Gibson, 2013). The four main business structures are sole trader, company,
partnership and trust. The variants which are dependent on the type of business structure are
tax liabilities, responsibilities as business owner and legal expenses relating to business. The
four options which can be applied by Mr X and Mr Y have been discussed below in order to
assess advantages as well as disadvantages of each structure. Further, legal issues relating to
each business structure has also been analyzed in detail manner (Bell, Bryman, and Harley,
2018).
Sole Trader: The specified business structure is operated as the sole person. The owner of
the business is legally responsible for all aspects of the business. It is the most common
business structure adopted by online store owners. Moreover, it is the easiest form to be
established as well as to operate. The business does not have a separate entity as in case of
company. The owner of the company is liable for all the debts/ obligations along with the
legal action which has been taken against the business. Sole trader business is optimum for a
shop with limited risk and liability (Burgess, 2017).
Partnership: It is another form of business structure for small business. The same is
construed when two or more individuals take the decision to run a business venture together.
The partnership allows the partner to invest assets as well as to pool their skills to business in
order to enhance the chances of success (Burns, 2016). In order to initiate a partnership firm,
it is necessary to draft an appropriate agreement which comprises, names of partners, the
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