This report will give important insight to the three friends, Susan, Sonil, and Shao, that are wanting to start a cafe business. Areas that this report will explore are which business structure they should trade under, what assets, income, and expenses they should expect, and what financial information and statements that will be essential for them when running the business. The information that I have provided will be supported by other findings such as textbook resources and web pages.
WHICH BUSINESS STRUCTURE IS BEST?
The three business structures, sole trader, partnerships, and companies, will be discussed below to justify which is the best business structure for Susan, Sonil and Shao to trade under.
SOLE TRADER
A sole trader is for …show more content…
However, Susan, Sonil and Shao should be aware that in a partnership, there is no separate legal entity, according to Atrill, McLaney and Weil (2013). This means that it is the partners and not the business who enters any contractual arrangements such as borrowing, selling, and employing. Each partner will hold equal responsibility for the actions made by the any of the partners. Because there is no distinct separation between the partners and the business, liability is unlimited which means that the personal assets of the partners can be sold in order to pay off any debts. The membership of a partnership business is also limited. Once the partnership is formed by a partnership agreement, no new members can join, otherwise, it will become a new partnership deal. Thus, making it harder for the business to potentially grow. If a member leaves, the partnership is …show more content…
Therefore, a coffee machine is one of the most important assets that they will require. Without this, they will not be able to produce coffee (unless it is instant coffee, but no one would really go to a cafe to purchase instant coffee). Another asset they will need is a cash register in order to process transactions and handle cash more efficiently. A coffee machine and cash register are both included as equipment. Furniture, such as tables and chairs, will also be required to operate their business so customers will have a place to eat on or sit. All these items will appear on the balance sheet as a non-current asset as it will not be turned into cash within the accounting period.
CASH
Cash will be required to operate their business in order to receive customer payments and to also make payments to suppliers. This will appear on the balance sheet as a current asset as it will be used within the accounting period to produce revenue.
INVESTMENTS
Without investments, it will be extremely difficult for the business to start up. Investments can be made by the shareholders/owners themselves (as the business should operate as a company), or by getting bank loans. Investments will also be required for the business to grow, such as investing in better equipment so the operation can be more efficient. Investments are also a non-current
WHICH BUSINESS STRUCTURE IS BEST?
The three business structures, sole trader, partnerships, and companies, will be discussed below to justify which is the best business structure for Susan, Sonil and Shao to trade under.
SOLE TRADER
A sole trader is for …show more content…
However, Susan, Sonil and Shao should be aware that in a partnership, there is no separate legal entity, according to Atrill, McLaney and Weil (2013). This means that it is the partners and not the business who enters any contractual arrangements such as borrowing, selling, and employing. Each partner will hold equal responsibility for the actions made by the any of the partners. Because there is no distinct separation between the partners and the business, liability is unlimited which means that the personal assets of the partners can be sold in order to pay off any debts. The membership of a partnership business is also limited. Once the partnership is formed by a partnership agreement, no new members can join, otherwise, it will become a new partnership deal. Thus, making it harder for the business to potentially grow. If a member leaves, the partnership is …show more content…
Therefore, a coffee machine is one of the most important assets that they will require. Without this, they will not be able to produce coffee (unless it is instant coffee, but no one would really go to a cafe to purchase instant coffee). Another asset they will need is a cash register in order to process transactions and handle cash more efficiently. A coffee machine and cash register are both included as equipment. Furniture, such as tables and chairs, will also be required to operate their business so customers will have a place to eat on or sit. All these items will appear on the balance sheet as a non-current asset as it will not be turned into cash within the accounting period.
CASH
Cash will be required to operate their business in order to receive customer payments and to also make payments to suppliers. This will appear on the balance sheet as a current asset as it will be used within the accounting period to produce revenue.
INVESTMENTS
Without investments, it will be extremely difficult for the business to start up. Investments can be made by the shareholders/owners themselves (as the business should operate as a company), or by getting bank loans. Investments will also be required for the business to grow, such as investing in better equipment so the operation can be more efficient. Investments are also a non-current