Sole proprietorship
The selection of the form of business organization for Carla is something to exercise best and strategic decisions to ensure that future problems are avoided. The most appropriate form of business organization for Carla is a sole proprietorship. The business organization will be formed and run by one individual, something that she has a vision for putting in her capital and plans to expand in the future. The business will be attached to Carla’s name and property; hence she will entirely be the sole owner enjoying the profits and losses alone. The business investment will only comprise her money, indicating that the sole business fits her investment plans. Therefore, the sole business/proprietorship is Carla’s best and simplest business organization that she can run and successfully operate the businesses.
Characteristics of a sole proprietorship
The business is owned by one individual responsible for his/her investment, capital, and decision making. The business risks entirely fall on the business owner. The management of business activities is done by the owner, who makes and implements plans without the need to consult. The process of making decisions is simplified because of the lack of bureaucracy
The formation of a sole proprietorship has no legal formalities and requirements. The formation process is simple, and the business owner can engage in business with no expectations to satisfy legal conditions. The business operation can begin upon the acquisition of licenses in certain circumstances.
The sole business has unlimited liability because the owner shoulders all business losses. Personal property is also attached to the business, especially in cases where the sole proprietorship business has obligations.
A sole proprietorship is not a legal entity because the owner and the business are not separated. The business is attached to the individuals; hence the continuity of the business relies on the ability of the owner to maintain the business. Most sole proprietor businesses have no long term future because of the dependence of the business to the owner.
Advantages
The formation process of sole business is simple and less costly because of minimal requirements
The decision-making process is quick because owners do not consult anyone.
The capital requirement for starting the business is slightly less as compared to other forms.
Business profits are enjoyed by the business owner alone.
The business is flexible because the owner can make personal decisions to change business operations
Disadvantages
The business organization is faced with a challenge of limited ways of raising capital. The business is run by one individual enjoying the profits alone; no other external parties can invest in the business hence making it difficult for a business to expand.
Unlimited liability; the business’s assets, together with the private property of the business owner, are attached to the obligations accrued by the business. Therefore the unlimited liability makes it difficult for the business owner to pursue expansion processes.
The business is not a legal entity; hence it is faced with the uncertainty of business continuity because it lacks the assurance of conducting business as a going concern. The managerial inefficiencies, poor decision making, and other business challenge my lead to business collapse.
Additional capital to expand the business
Carla should resort to applying for a bank loan as her best source of additional capital for her business. The business loans are perfect options that can help her acquire a large amount of cash to be invested in the business and begin the repayment process. Carla’s assets will hover be used as the collateral to provide a guarantee for the loan. The use of bank loans as a source for additional capital will ensure that Carla does not lose ownership and control; hence it remains the best option. The monthly loan repayments are structured, and if she repays them consistently, her assets will not be seized.