Business Law: Recommending a Business Structure for Herb's Startup

This report assesses the most suitable business structure for Herb's new venture, concluding that a partnership is the most appropriate choice. The rationale behind this recommendation includes the ease of establishing a partnership, increased fundraising capabilities through multiple partners, and simplified decision-making processes. The report explores how Herb, Bill Williams, and George Robbins can form a partnership, detailing investment strategies and profit distribution. It also considers the roles of Herb's father and Uncle Joe, suggesting options for personal loans or acting as sleeping partners. Alternatives such as joint ventures and incorporation are evaluated, highlighting the advantages and disadvantages of each. Furthermore, the report outlines a capital-raising plan, incorporating personal loans, investments, and potential bank loans secured by personal assets. Desklib provides a wealth of similar solved assignments and study resources for students.

BUSINESS LAW

Table of Contents
Question 1..................................................................................................................................3
Question 2..................................................................................................................................3
Question 3..................................................................................................................................4
References..................................................................................................................................5

Question 1
Partnership form of business is most appropriate for Herb’s business.
Question 2
Partnership form is most appropriate for Herb’s business as in partnership the ability to raise
funds increases with the increase in the number of partners. It is also easy to establish
partnership through developing oral or written agreement and it requires limited legal
requirements to be complied (Yusupova, 2017). In present case, partnership can be developed
between Herb, Bill Williams and George Robbins. As Herb and George Robbins are
investing capital they could get interest on same and further remaining profits can be
distributed among themselves in agreed proportions. As Herb’s father and Uncle Joe also
want to invest in the business, thus they can give personal loan to the partnership firm or act
as sleeping partners. Both the above specified alternative can be adopted as per their choice.
Another advantage which will be procured through forming partnership is in comparison to
corporation is that partnership firm is simple to establish and operate. Further, as the owners
are the managers thus decision are made quickly without any bureaucracy. Moreover, as
partners guarantee their personal assets for loans along with business assets, it is easy for
them to get loan for acquisition of capital.
The other two alternatives available with Herb’s business are:
 The first one is joint venture which is similar to partnership but the same is
established for a limited period or for a single project.
 The second alternative available is to incorporate business as a corporation. In this
option, the persons who are interested in the business will purchase the shares of the
company equivalent to the amount which they wanted to invest. Shareholders have
limited liability for the debt of company i.e. to the extent of amount which is due on
share call (Forms of Business Ownership, 2017). Thus, in present case Herb’s father
and Uncle Joe will purchase share amounting to $5000 each and will be liable for no
future liability. In order to raise capital, the option available with Herb’s organization
is sale of stock. However, the disadvantage attached with this form of business is that
the process of incorporation needs more funds as well as time (Burns, 2016). Further,

incorporating might result into higher taxes overall and the dividend paid to
shareholders are not deductible from business income.
Question 3
The required amount of capital can be raised in following manner:
 $10000 will be invested by Herb’s father and Uncle Joe as personal loan or
investment as sleeping partner as per their choice.
 George Robbins is also willing to invest $10000 in the business.
 As bank is ready to increase the loan to $10000 in case Herb’s father consigns the
same. Thus, the specified amount will be attained in same manner.
 Remaining $10000 will be procured by all the partners in equal manner or will be
financed through bank on the basis of mortgage of personal assets available with each
partner.

References
Burns, P. (2016). Entrepreneurship and small business. Palgrave Macmillan Limited.
Forms of Business Ownership. (2017). Retrieved from < https://www.allbusiness.com/forms-
of-business-ownership-674-1.html/2 >.
Yusupova, A. (2017). Partnership Cooperation of Companies: Key Characteristics and
Influence to Innovative Activities. In Financial Environment and Business
Development (pp. 623-631). Springer, Cham.