Question

Mr. John decides to start a small business with the intention to expand it in the future. He has some capital, but he fears he may lose some of his personal assets if the business fails. Also, Mr. John is not sure he has enough capital to proceed with a sustainable business. At the same time, he has some doubts in sharing the ownership of his business with partners that had not to participate in the 'creation of his business project'.

Having in mind these issues, advise Mr. John regarding what you consider to be the optimal business type for a safer, and with more prospects of development and sustainable growing business. Argue by comparing the business types that can be considered a viable option.

(400-700 words)

Answer 1

I would Mr. John to register his company as a OPC - One Person Company. Such a company can be formed by single individual and not two or more partners. Also, the rules applicable to a Private company would be applicable for OPC. This would mean that Mr. John would not be liable for any losses as an individual and his personal assets would be safe. In contrast, if he had opted for Sole Proprietorship firm, he would be entirely liable towards all the losses incurred/caused by the firm. The creditors could liquidify the personal assets of the proprietor in case of any default or closure. Also, in case of Partnership firm, Mr. Joh would have to partner with one or more other individual and share the responsibilities of the firm.

Corporation would require several owners with shares to distinguish their ownership. And Limited Liability Company and Cooperative company too would require more than one owners. Hence OPC would be most suitable as per Mr. John's requirement.