The aim and objective of any business is to maximize the return from operations of a business. The business structure in this case will have to be a sole proprietorship. Though there will be a complete organizational chart and hierarchy with the division of task and responsibilities, the business will be owned single-handedly in order to reduce the income tax expenses that the business will have to bear. A partnership structure will result in partnership profit taxes too and thus sole proprietorship will be the best structure for this case.
Though there is the concern of risk management in this scenario, the division of profits and the responsibility assignment, it has to be considered that the entity needs a stable structure in the first few years of its operations. Stability in the structure can be maintained by a smaller board – a sole proprietor – running the company in tandem with the other partners without any structural interference. The business operations would be easier to converge and manage if there is single ownership of the business.
In spite of the fact that there could be succession issues in the business upon the death of the sole proprietor, it is necessary to go on with the sole proprietorship format. The safeguard here can be a contract between the partners can be of loaning the sole proprietor the funds for the business for which they can claim the original amount they invested in the business. ...Show more