Question

Jane Doe, who has substantial personal wealth and income, is considering the possibility of starting a new business in the chemical waste management field. She will be the sole owner, and she has enough funds to finance the operation. The business will have a relatively high degree of risk, and it is expected that the firm will incur losses for the first few years. However, the prospects for growth and positive future income look good, and Jane plans to have the firm pay out all of its income as dividends to her once it is well established. Which of the legal forms of business organization would probably best suit her needs? Discuss with reasoning.

Please explain briefly. It is important.

Thank you.

Answer 1

She should be trying to undertake sole partnership as a type of business organisation because in sole proprietorship all the profit and loss will be accruing to the sole proprietor, and the liability of the sole proprietor would be unlimited and it can also be seen that the sole proprietorship does not have a perpetual existence and it is only existing till the life of the owner.

It is seen in the question that all the dividend is to be allocated to the same person so all the gains which should be accruing to the the sole proprietorship business should be transferred to its owners and since she have an adequate amount of capital and she can undertake an adequate amount of riskr, the best way to fund her own business with her own money and it will help her tto help in expansion and growth and have the flexibility of no cost related to capital.

So she should be trying up with sole proprietorship type of business organisation.