Question

• Two friends are considering launching a small company, which they believe has potential to grow into a large firm in the future. Identify three (3) important factors they should take into consideration when selecting a form of ownership. Next, recommend one (1) form of ownership you believe will best serve the organization now and in the future. Justify your response.
• Identify two (2) key criteria you would use to evaluate different franchise opportunities,

Answer 1

For a replacement or projected business, the choice of an appropriate style of possession business is usually ruled by the subsequent factors-

1- Nature of business activity: this is often a crucial issue having an instantaneous concerning the selection of a style of possession. In tiny commercialism businesses, professions, and private service trades, sole-proprietorship is predominant.

2- The second issue that affects the shape of possession organisation is that the scale of operations. If the dimensions of operations of business activities is tiny, sole ownership is suitable; if this scale of operations is modest — neither too tiny nor overlarge — partnership is preferable; whereas, just in case of enormous scale of operations, the corporate kind is advantageous.

3- Capital requirements: Partnerships will usually raise funds with larger ease, since the resources and credit of all partners area unit combined in an exceedingly single enterprise. firms area unit sometimes best ready to attract capital as a result of investors area unit assured that their liability are restricted.

Partnership firm is best counseled to the buddies UN agency area unit aiming to begin their business - A partnership firm is a corporation that is created with 2 or additional persons to run a business with a read to earn profit. every member of such a bunch is understood as partner and conjointly referred to as partnership firm. These corporations area unit ruled by the Indian Partnership Act, 1932. Following area unit the characteristics of Partnership Firm.

Advantages of partnership corporations are-

- Sharing of Profit and Loss : In partnership firm all the profits and losses area unit shared by the partners in any magnitude relation as united. If it's not given then they share it equally.

- Principal - Agent Relationship: This relationship relies on mutual trust and religion among the partners within the interest of the firm. Business of the firm is also carried on by all the partners or anyone of them acting for all. in line with this, each partner is AN agent once he's engaged on behalf of different partners and he's the principal once different partners act on his behalf.

A franchise may be a tried business system that has been market tested. The franchise has systems in situ that permit its franchisees to possess and operate thereunder tried system and complete. There square measure tips in situ to confirm that each owner is adhering to those self same business practices.

- The Market. encompasses a outlined market been determined? Understanding with complete certainty World Health Organization you may serve helps to work out the viability, and ultimately the profitable, of the franchise.

- Level of Investment. you have got to start with a private inventory of what quantity you'll be able to snug invest. All franchise corporations can investigate your liquid capital (sometimes referred to as the capital required) your assets-to-liabilities, and your web price. If you are available in under capitalized, you're additional seemingly to fail and drain the resources of the franchise company, and also the franchise is like Associate in Nursing scheme engineered for the collective sensible of all the homeowners. Be honest with yourself regarding what you'll be able to invest.