The focus of this report is an explanation of which legal structure would best suit Splitenz salon, as one of the partners will be leaving. The report will outline the advantages and disadvantages of being a sole trader and being in a partnership, and a recommendation and justification for the best suited legal structure for Splitenz salon.
Legal structure/options for ownership for Splitenz salon
There are a couple of legal entities that could be used to conduct Splitenz Salon.
These entities include:
The sole trader is where one person who is the exclusive owner of a business is entitled to keep all profits after tax has been paid but liable for all losses. It is the most common type of entity used in Australia although it has unlimited liability for the business owner.
A Partnership is when two or more individuals manage and operate the business. Both owners are equally and personally liable for the debts from the business.
Advantages/disadvantages of being in a partnership and being a sole trader
Sole trader advantages:
Low cost of entry
Simplest form of legal structures
Complete control of business
Less costly to operate
Owners right to keep all profits
No tax on profits
Less government regulation
Low start-up costs
Less costly to operate than a company
Shared responsibilities and workload
Pooled funds and talent
Minimal government regulation
No taxes on business profit only personal income
The recommendation for Splitenz legal structure is that Kristen should continue on in a partnership with her friend April when