Managing Financial Resources and Decision - Essay Example

Sole traders and general partners can have their separate properties answer for the liabilities of the business organization because of their unlimited liability when the business entities go wrong There is also anonymity, in the limited company as one can appoint nominee officers in said business organization. Such anonymity can be an advantage as to keep some sense of invincibility in some aspects as compared to revealing many possible weaknesses to those who are interested with the company.

As compared with a partnership, many problems can be avoided in case of limited company. This would include defining who is in charge and who should own the business and in cases of resignation of a partner that could disrupt the business. Another advantage over the sole trader and partnership could come from better credibility brought from better transparency and certain anonymity in the market place. The effect of this could be some degree of ease in raising loans for the business. Lower tax liabilities compared to a sole trader could also arise.

While a sole trader’s tax could reach as high as 40% of net profit, an owners of a limited company can so drawing a salary, which could in effect an avoidance of tax for a higher rate can be avoided Limited liability as an organizations are not without some of the disadvantages however. One is chance of ownership of assets being locked up in the company. There is also less privacy and more transparency because of the need to register company's accounts, officers and shareholders at Companies House. 2.2 Task 2 --The initial cost.

Provide detail of items of expenditures you will need to obtain before you start trading. State how much capital will be needed on commencement, and how and where this initial finance would be obtained. Investigate a range of different sources of finance and comment on how they compare. State why the chosen sources of finance are appropriate for your business. The details of expenditures that that the owner would need to obtain before he/she starts trading include the following. He/she would need to spend for the place to rent.

He/she would need a land and building which he/she can either buy or rent. In addition, he/she would need of course to buy for inventories to sell. He/she would need to pay for the salaries of sales and store personnel. Basically the amount of capital would be guided by the amount of revenues that the owner could be making per period. The higher the expected revenues, the higher would be the need for expenditures as the same could mean higher space to place goods for sale and serve the customers.

The expenditures there could include but capital expenditure and non-capital expenditure. The different sources could come from my investment which can either be in the form of cash or property. Another source from loans which can come from suppliers who will sell the goods on terms. Thus