Acct_561_Week_2

Business Consulting Model Mark Kovacs University of Phoenix Business Consulting Model Sole Proprietorship Advantages Its creation requires only registration with the Trade and Companies Register (RCS) or in the trades and no minimum capital is required (as a sole proprietorship does not own assets). The steps for the creation of a sole proprietorship are simplified and less expensive. It is the way that requires less paperwork in its business constitution, that would be not forced to register in the commercial register (Nottonson, 2007). Disadvantages The entrepreneur is personally liable for debts incurred for the business, if it has some personal property; bankers will give him a loan more easily if it is limited to the capital of a corporation. From a social point of view, the individual entrepreneur shall be subject to the social workers' self-employed. In case of cessation of activity, it therefore cannot receive unemployment benefits. From a social point of view, the system of social protection of traders is less favorable than employees. In case of bankruptcy, individual entrepreneurs do not have unemployment insurance the general scheme (Bhide, 2000). Partnership Advantages It limits the liability of shareholders to capital contribution to society. This business requires less formal rigor in the organization and lower minimum capital. It requires two to seven partners to form the partnership business. The partnership may allow the pooling of resources more developed. It can be a complementarily of skills, experiences (and the sales manager) but also greater financing capacity. Responsibility and therefore the risk are shared between the participants in the enterprise. Partners can help each other in the management of the company by a division of labor, especially in case of absence or illness (Nottonson, 2007). Disadvantages Shares cannot be transferred freely; the partner needs the consent of the other partners. In certain profit levels the tax rate of 30-35% can be a disadvantage compared to variable rate of income tax forms that are taxed. The partnership relationship requires a huge investment of time for its implementation and for the long term. Decision making is shared between the partners, where certain rigidity and the possibility of conflicts of interest, for example during the definition of the strategic directions of the business (investment, hiring). Profits will be divided between the partners. Financial Statements There are two basic financial statements used by most businesses. The balance sheet shows the assets, liabilities, and equity. Each position in the balance sheet account is carried by the last day of the financial period. The income statement determines whether a net profit or net loss was achieved by comparing total revenue and expenses for a specific period. A third report is used by some companies. This is the ratio of equity that presents changes in equity during the year (Nottonson, 2007). Consequences Associated with Forms of Business Tax Implications From a tax perspective, will be subject to tax on income, BIC (business profits) or BNC (non-commercial profits) as appropriate. The partnership does not have a separate form for tax purposes. If the enterprise has suffered a loss, the partner can deduct losses of income from any other use they receive. This will lower the total income of an individual partner and reduce the amount of income taxes he or she must pay. The profits are taxed at the personal rate of each partner's income tax. The partners cannot take advantage of income splitting or tax deferral opportunities with companies (Bhide, 2000). Legal Implications Not many business licenses are required for a sole proprietorship business. The owner must have the license of the profession he is working in, for example, if the sole proprietorship is lawyer, he must have a degree and must have a license from attorney. It depends on the business of the sole proprietorship that which license is required as a business license, state testing and local licensing. Accounting Implications, such as SOX and FASB The accounting implications in sole proprietorship include revenue recognition, cash method, and accrual method. These methods recognize revenue and expenses of the business. Accrual methods determine the merchandise sales and inventory of the business. Product of Small Business The product chosen for the small business is pizza. It is the intention to start a ‘Pizza Palace’ as a small business. A ‘Pizza Palace’ in a busy street is the main idea where there will be more customers. It is expected that the business will generate reasonable revenues to cover up its expenses and initial start-up cost. In light of this, idea of opening a pizza is more than a bet from the entrepreneurial point of view. It is universally appreciated and frequented the premises with excellent prospects for success. One could argue that the pizza around if they are many, but their number should not discourage potential entrepreneurs: one cannot say that in fact, the Pizza palaces offer a quality product (in fact), and it is precisely in this direction that should direct their efforts. Our mission is to offer a healthy and accessible to all, ensuring absolute quality and respect of all production standards, paying close attention to product quality and raw materials used in the production cycle as well as careful management of the cold chain, allowing the product safe and sound preservation. Depending on the local customers, one can opt for a pizza restaurant located in the center of a city, possibly within a restricted traffic area and accessible only by those who travel on foot or by public transport. In all other areas, in towns or suburbs, smaller cities, is of fundamental importance to the availability of parking. Good locations are the main means of communication, with a significant passage of people and vehicles, but also the outlying residential areas and adjacent to night clubs, cinemas, sports complexes (Schaper & Volery, 2004). The pizza palace must be a welcoming place, different from the others, with its own distinctive personality that makes the place unique, attractive, and comfortable. For this, the furniture must be chosen carefully, according to personal taste but keeping it simple and at the same time cozy. Similarly, the same care must be placed in the choice of paintings and furnishings, wall colors, and styles of table cloths, dishes and cutlery, the menu must be elegant, clear, and understandable, and a good sign, visible, and inviting to camp outside the room. Not only does the memory of the goodness of pizzas that the customer takes home (and that makes one want to come back and talk to its friends), but also how it is we felt at ease at the business itself: the characteristics of the interior, and staff who work there. (Bhide, 2000). Choice of Business Form The business form chosen for Pizza Palace is partnership. This form is chosen because pizza and setting up of kitchens, machinery, furniture, lightening will require heavy amount of investment. Initially, three partners are chosen for the Pizza Palace formation. This form of business is chosen because of several reasons. The main advantage is that it is the easiest way to become as a trading company, both in regard to the business constitution and the administration and accounting. The downside is the liability assumed by members: unlimited, since there is a we are in a partnership in which the partners acquire certain rights but also obligations (Schaper & Volery, 2004). The partnership could be a good choice if one wants to manage the business with a partner and if one does not want to incorporate the business in society. A partnership would allow the partners to combine their financial resources with those of a business partner. One can set the terms of their business with one partner and protect them in case of disagreement or dissolution through a trade agreement. As a partner, they will share the profits, according to the terms of the agreement. In addition to the simplicity of the procedures and administration, the general partners may also attract other capital without them interfering with the management of the company. Furthermore, the limited partners may be part of a more simple and less expensive than the anonymous and limited liability. In the future if the business is developed, the partners can be increased in number. Also revenues can be shared either equally distributed or either distributed according to the investment made. There is also an option of silent partners. This partner refers to those who invest but do not participate in decision-making activities. The partners can choose which form of activity they want to be (Bhide, 2000).   References Bhide, A. (2000). The origin and evolution of new business. Oxford, UK: Oxford University Press Lendrum T., (1997). Strategic Partnering Handbook, A Guide for Managers, McGraw-Hill Nottonson, I. N. (2007). Forming a partnership: And making it work. Irvine, CA: Entrepreneur Press. Schaper, M. & Volery, T. (2004). Entrepreneurship and small business: A Pacific Rim perspective. Milton, QLD (Australia): Wiley.