Question

Your choices are:

a.     Sole Proprietorship

b.    Joint Venture

c.     Partnership

d.    Limited Partnership

e.     Limited Liability Company

f.     Corporation

Freda is a stay-at-home mom whose youngest child just started first grade. Freda would like to earn extra money while her kids are at school. She wants a flexible schedule because she likes being available to volunteer at the school when needed. While searching the Internet, Freda discovers Sugar-Girl, a cosmetic company that will sell her cosmetics at a reduced rate and allow her to resell them to friends and neighbors for a maximum profit of 15%. Any cosmetics Freda does not sell after six months may be returned for a full refund. After doing her due diligence, Freda learns that the company is very respected, the product (which is not tested on animals) has a good reputation, and that 54% of the “sales” people, report an annual profit margin of 12.5%. Freda would like to become a “Sugar-Girl.” What type of business structure would be best for Freda and why?

Answer 1

Solution:

According to Given question important need of the Freda are as follows

1. The primary reason Freda need flexible schedule and

2. This business will be for extra income that means not the main source of Income this will be a secondary source of income.

Hence Sole Proprietorship business will be most suitable because

Following advantages of sole proprietorship make this business structure most suitable

1. Time investment and schedule as per the need of the owner of the business.

2. Easier to set up a sole proprietorship business with very minimal paperwork.

3. Easy to manage as there is no distribution of profit among other members.

4. Maximum privacy to the business owner as no information to pass to another person like in case of a partnership or company.

5. It is easier to change the business structure to others like partnership or company as and when required in the future.

All of the above advantages suites best for the Freda requirement.

Note:

1. Othe form of business like a partnership, Joint Venture, and Limited liability partnership will demand time investment plus profit will be distributed hence it will be difficult to manage. costly to set up such form of business as need more paperwork and legal fees  

2. Corporations and limited liability companies are more suitable for large scale businesses where a huge amount of capital is required. This business structure also calls for legal compliance like audit and annual tax return to be done by professionals. establishing a company is also much costly affair in comparison to a sole proprietorship.