Custom «Legal, Social, and Economic Environments of Business» Essay Paper Sample
Interpretation of the scenario issues
In the above scenario, we are enlightened of the fact that the inventor who owns a home based industry that engages in activities like cleaning, cooking, minor home repairs such as repairs and re-modeling of different home appliances according to a customers requirement has a brilliant innovation that regards home appliances, but lacks the funds and management skills to take up the business. Other than knowing that setting up a manufacturing plant is expensive, the inventor knows nothing else concerning manufacturing. The inventor is well aware of other similar products in the market, but argues that they are unsafe naturally. The new idea is bound to gain popularity in the market hence is confident that it will succeed (Meiners, Ringleb, and Frances, 2008).
The advantages and disadvantages of each business type
Sole proprietorship is a form of business owned by an individual thus is not taxable by law even though the owner has unlimited liability which means that all the property owned by the individual is at risk. However simple they may be to establish and demolish, income obtained from the business is added to ones personal tax returns. When it comes to making of decisions, the owner needs not to consult anyone and thus it is easy to dissolve if one desire to do so. This is not the best method to rely on having savings since there is no separate account for business and personal income. They are not placed well to attract those customers of high caliber (Steingold, 2010).
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Partnership is similar to the sole proprietor only that it has two or more individuals owning the business. All of the existing partners will have unlimited liabilities, profits and losses are shared among legal owners depending on their capital contribution proportion, and lastly, income obtained is directly reflected on owner's personal income tax sheets. People who luck funds like the investor will be at a position of executing their inventions and ideas at ease. The business benefits from having partners who have complementary skills. Incase a member of the partnership business dies or leaves the group, the partnership is dissolved instantly. Making of decisions is done jointly and as such a high chance exists of conflict arising among its partners. There exist three kinds of partnerships which are: general, limited, and the joint venture type of partnership (Steingold, 2010).
A corporation is a business entity where people are treated separately from owners of the business normally known as shareholders (own a share of the organization). In this form of legal business entity, they can own property and assets; the solution to lack of fund is solved because one can take on debt to be able to finance the operation of projects. There advantages include: liability is limited compared to the two above, permanency even after death of a shareholder, ownership of the shares is transferable, and accessibility of capital is heightened. The only disadvantage experienced by this business entity is that the income generated by the corporation is normally taxed twice (Steingold, 2010).
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As a manager, I would prefer going for the partnership kind of business because it possess to accommodate the needs and requirements of the inventor without him having to strain too much in raising the funds to start the business. The general type of partnership is the best to adapt to because partners will delegate responsibilities for both liability and management, not forgetting the well sharing of profits and losses according to their own local arrangement. Other members should be able to award the inventor a higher profit proportion because he is the one who came with the idea. By so doing, they will be appreciating the chance given to them by the inventor who had a choice of going for the sole proprietor or corporation entities (Rob, 2003).
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