Grace And Martin Case Study

For Joshua, Grace and Martin, it is important to consider which business structure is best suitable for them and the legal implications by looking at the advantage and disadvantage of the business structure as one wrong decision can create many problems in the business in the future. These business structure includes Sole trader, Partnership, Companies and Trust. A Sole trader has only one owner who controls and owns the business. The owner provides all the fund required for the business. It is the easiest and simplest form of business structure in which the owner keeps all the profit and maintains privacy. However, it has unlimited liability meaning if the business fails or results in loss the creditors have access to all the business …show more content…
It has tax advantages and also is high in cost like a company. Trust also has disadvantages like it can be expensive to establish and to maintain the trust and also is difficult to change the structure once a trust has been created.
After considering all the business structure and on the basis of the situation of Joshua, Grace and
Martin, it is clear that they have always wanted to open a business together which eliminates sole trader from the available list of business structure as only one person can own and control the business and have all the profit. Trustee, as well does not fit the situation as it is expensive to maintain the trust and most importantly it is more complex and sophisticated to set up than any other business structure. It has complex legal structure like problems may arise when …show more content…
Hence they are left with Partnership and
Company, and will have to consider the differences between them. In Partnership business structure, the partners have the rights to make decisions whereas in a company structure, the shareholders have the power to make decisions. In Partnership, the partners are liable for the partnerships debts and legal responsibilities as it has unlimited liability for example, if the business results in loss the partners will lose their personal assets whereas company has limited liability meaning only the shareholders need to pay the shares remaining in the case of failure of the business. In a company there is a perpetual succession which means that there is no effect on the business regardless of what happens to the shareholder at any time, the company continues to exist whereas in a partnership a change of partner or if a partner decides to retire can results in the dissolution of the existing business. Partnership does not have a separate legal entity like a