As per the question, Bimana told Bibek that he should convert
and start up a sole trader form of business. This is not considered
as an intelligent decision.
According to me, Bibek if thinking of expansion should go for
setting up a partnership form of business. There
will be additional benefits attached with starting a partnership
firm:
- In order to expand, more number of employees will be needed.
This will help in dealing with large number of customers with
ease.
- Setting up partnership firm is an easy process, there are less
number of legal formalities attached to it.
- Every partner brings along with him certain portion of capital.
This will increase the amount of investment and thus availability
of more money for expansion.
- The risk will be shared equally by all the partners and not
borne by only one partner. Thus running a business becomes
easy.
- Registration of the partnership firm is not compulsory, hence
less legal formalities attached while setting up the business.
Steps involved in setting up partnership
business:
- Selecting the name for the business: the first
step involves deciding on the name under which the business will be
operating.
- Deciding on which state the business need to be set
up: the owner should decide under which state the business
will operate. This will help in registration.
- Deciding on all who will be the partners: one
should decide on who all will be the partners and with whom the
business will be carried out.
- Preparing the partnership deed with the
partners: next step is the preparation of the agreement
between the partners, containing all the terms and conditions about
the business. The deed is signed by all the partners.
- Getting the partnership firm registered: the
partners need to contact the registrar of the state where they are
setting up the business, and get their business registered by the
registrar.
- Obtaining certificate of incorporation: the
registrar then issues the certificate of incorporation to the
partnership business. After obtaining this certificate, the
business is said to be legally incorporated.
- Obtaining certificate of commencement: after
the certificate of incorporation, the business gets certificate of
commencement from the registrar, thus getting permission to
officially start the business.
- Getting employer identification number: this
number is issued to the employer. Doing this will help the business
create separate account for settling taxes in future
Costs involved in setting up partnership
business:
There is no particular pre defined amount decided for setting up
the partnership form of business. Although there are number of
costs involved in setting up the business:
- The cost of getting the firm registered requires certain
registration fee that need to be deposited with the registrar.
- The cost of stamp duty while registration is must to be
incurred.
- Getting the partnership deed ready also involves certain amount
of money that need to be borne in advance.