2.8: Comparing Structures

Seek Advice Before Making Decisions

While a sole proprietorship is the optimal choice for many people starting small businesses, some people select this method primarily because it is the easiest way to start and open a business quickly. It is wise to sit down with both an attorney and an accountant and discuss the details of the business and where you see it in five or ten years. Cover all the bases including liabilities, taxes, employee benefits, and the need for investors before making your decision.

Start Small and Incorporate Later

While most businesses can only anticipate future returns, the business structure that protects personal assets and provides a favourable tax environment will be most attractive to investors. If, however, you do not need investors or are not seeking shareholders when starting up a business, you can do what many business owners have done and start small as a sole proprietor and incorporate later as the business grows.

Consider Liability Issues

The potential for liability from customer relationships or interaction impacts heavily on your liability risk. For example, someone who is opening a business that will sell goods to customers via the Internet or through mail order is less likely to garner lawsuits than someone who owns physical store locations, where customer foot traffic (and potential injuries) could result in such a lawsuit. However, many small business owners opt for coverage from insurance policies rather than going through the time and expense of incorporating. Organizations perform a variety of different functions. Traditionally, managers thought of the functions of a business as departments, such as Marketing, Finance, and Accounting. However, they are beginning to view business functions as important processes that occur throughout the organization’s value chain, which is the series of interdependent activities that bring a product or service to the customer. For example, value chain activities may include inbound logistics, operations, marketing and sales, and order fulfillment.

Research

Interview a businessperson about their understanding of his/her business’s value chain. What does the person see as the primary functions of his/her business?

Establish which Functions are critical

• Successful organisations depend on the contributions of five key functions –
• human resources,
• information management,
• marketing,
• operations management, and
• Accounting and finance.

But these functions do not exist in isolation to each other!
Some functions are critical and some are less critical. Businesses usually divide the functions into two categories – “core” and “support” functions.