Unit 9 P1

Executive Summary
This business report will review the operations and future prospects of Rise and Shine Café. Rise and Shine is owned and operated by Jane King in the hills district specialising in organic coffee and pastry’s. This report will examine the possible legal structures for the business, and present a comparative analysis of these possible options and recommend the most appropriate legal structure for the café.

Possible Legal Structures
Jane King operates a successful café in the Hills district, increased growth in the area, demand for her cafes product and opportunity of a partnership has led to a review of the legal structure of the business. Jane King can continue to operate her café as a sole trader or the entrepreneur can
establish a partnership with her brother Justin.

Sole Trader
A sole trader is an unincorporated business entity and is a business that is owned and operated by one person. Jane King could still hire employees for the café as a sole trader and is the individual who assumes the risk and is legally responsible for the business. The sole trader provides all the finance and makes all decisions in regards to the establishment and operation of the business.

Partnership
A partnership is an unincorporated legal entity and the business is owned and operated by between two and 20 people with a view of a profit.
There with some exceptions to the number of partners depending on the profession but none of which will affect Jane King’s businesses. A partnership is very similar to a sole trader and within a partnership there may be a partner/s who contribute financially to the business but takes no part in its operation and this is known as a limited partnership.

Question 2
Rise and Shine Café is presently operating as a sole trader under the ownership of Jane King, however the prospect of establishing a partnership with her brother has arisen. Table 2.1 and Table 2.2 describes the advantages and disadvantage of operating as a sole trader and as a partnership respectively.

Advantages
¬ Low cost of entry – Establishment costs of business are relatively low
¬ Complete control - Owner has total control over the management , operation and direction of business without the interference of others
¬ No partner disputes – As business is owned by one individual there is no need to confer with others and accommodate to their needs and opinions
¬ No tax on profits , only on personal income – Sole traders retain all profits of the business and are not required to pay taxes on profits but only on their personal
income

Disadvantages
¬ Unlimited liability – Owner of business is solely responsible for the debts of business. All personal assets are at risk and owner is at risk of being sued
¬ Need to carry all loses- The loses of the business are carried by the owner personally
¬ Burden of management – All decisions must be made by sole trader and business successes or failures rely on the decisions of one individual.
¬ Difficult to operate if ill – If sole trader is suffering from an illness the business may suffer financially and physically due to owners limited ability to operate the business

Advantages
¬ Shared Responsibility and Workload – Partners share the responsibility and workload of the management and operation of the business
¬ Pooled funds and talents – Each partner will contribute funds and personal skills and talents into the business, increasing the ability of the business. A partnership will have a greater borrowing capacity compared to a sole trader.
¬ Minimal government regulations – Partnerships have limited regulation by governmental bodies
¬ Less costly to operate –

Disadvantages
¬ Unlimited liability – Partners of the business are wholly responsible for the debts of business. All personal assets are at risk .
¬ Liability for partners debts – Each partner is liable for the partnerships debts ; that is , each partner is liable for the others debts as well as their own
¬ Possibility of disputes – There is a risk of tension and disagreement amongst the partners of the business as decisions and authority is shared
¬ Divided loyalty and authority

Recommendations
This business report analyses the possible legal structures for Jane King’s café Rise and Shine.
A comparative analysis of the advantages and disadvantages of a sole trader and partnership have been completed. Based on this analysis , it is recommended at the current time that Jane King continues to operate Rise and Shine Café as a sole trader instead of establishing a partnership with her brother Justin.

It is most appropriate for Jane King to operate her business as a sole trader as there will be no disagreements in the management of the business as well as within her family as the partnership would have been with her brother. Disputes in the management of a business would have also affected the employees of the business as they might feel they have divided loyalty. This leads to confusion in authority of the business drawing away from its focus on their customer service which the café is renowned for.

Operating Rise and Shine café under the ownership of a sole trader is most appropriate for the business as Jane King can solely retain all profits from the business and not pay tax on them only on her personal income. By operating as a sole trader she is only liable for her own personal debts instead of those of her partner if the business was operated as a
partnership.

Being a sole trader is the most appropriate legal structure for the Rise and Shine Café as by having one owner is easy to make changes and decisions in the business and doesn’t need to consult others making it more flexible business. Operating as a sole trader means the oopurutnitu to expand is still available. The business can operate independently and without interference so making it more flexible.