Question

Nora plans to open Nora's Nursery, a plant sales and plant supplies outlet, and she plans to hire Mike, Ryan and Christy. Nora will invest only her own money. She does not expect to make any profit for at least two years and to make almost no profit for the first three years, but she hopes to expand eventually.

Which form of business organization would be most appropriate? What are the chief characteristics, advantages, and disadvantages of this form of business organization? If Nora wants to obtain additional capital to expand the business, but does not want to lose control of the Nursery, what is her best option?

Answer 1

The most appropriate type of business organization suited for Nora is "Sole Proprietorship" . Because as listed terms and condition i.e She wants to invest her own money,there are only three worker thats why its small business ,which are the conditions of a sole proprietorship business.

characteristics

- It is usually adopted by small business entities.

-Unlimited liability; It means, the creditor of the business may go through the personal assets of the owner if the business cannot pay them for the years.

Advantage

-It is the simplest and most flexible business structure.

-owner has total control and full decision-making power over policies, profits and capital investment.

-Easy to close down the firm

- Lower tax rate on this kind of business is applicable

Disadvantages

-It could be the case of personal bankruptcy.

-the sole proprietor may not be able to raise additional capital from outside sources to expand the business,because of limitation of this kind of business.

-death of owner leads to close down of the business.

In case she wants to expand their business by adding additional capital she could have the best option is to borrow money from the banks.