Question

Leon has worked for a small tool and die company for several years. The owner is retiring and Leon has the opportunity to purchase the business. However, he plans to retire in 10 years, and he knows that neither of his children has any desire to work in the business. What appears to be Leon’s key consideration in choosing an ownership structure?

a. Business control and transfer of ownership

b. Ease of start-up and administration

c. Management structure

d. Legal and financial responsibility

e. Taxation and division of profits

Answer 1

Every key consideration has its own advantage and disadvantages.

Key considerations that Leon has to choose for ownership structure are explained below:-

Business control and transfer of ownership

He has to kept in his mind while purchasing the business that the control and ownership should be transferred to him by the owner.

Ease of start up and administration

He will get a business which is built but if he wants then he can also put some more investment for expanding his business and administration.

Management structure

He can opt for the old one management structure or can make his own management according to his way of doing business.

Legal and financial responsibility

Also he has to manage the legal and financial responsibilities of business he has to file this return on time and also look into the financial conditions of the business.

Taxation and division of profits

His business has to pay taxes to the government which had collected from his customers by selling his product. Also consider his amount of profit that he earn during the business period.

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