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Sam and George want to start a business. They want to open a bakery to produce a type of bread that is new in Australia but resembles a similar product from the Middle East. George is a qualified baker with a four-year of experience. He also has a readily available sum of money ($100,000) which he inherited. Sam is an accountant with extensive knowledge and all the required accounting equipment but no valuable assets except for his car. Sam has found a suitable bakery that is leased for $20,000 per annum with a three-year lease option.
Based on the available information, the most viable business structure will be the sole trader structure. It has several advantages over the structure of the company, such as reduced cost, taxation, paperwork, and ease of set-up. The sole trader structure allows for full control over the business. At the same time, the liability for financial and tax debts is also personal, so greater risks are involved. The structure allows for staff employment. The set-up costs are also low: the only step that requires payment is business name registration while obtaining an Australian Business Number (ABN) is free, and a separate business bank account is not compulsory. The tax is calculated as an individual tax, and there is a tax-free threshold of $18,200, which is important for a small-scale and young business. Another advantage is the accounting paperwork: the expenses and income of the business do not need a separate tax return – just a separate schedule within the individual tax return, an easy task for Sam considering his expert knowledge.
George can employ a role of a production manager, considering his experience as a head baker, granting him both the food production knowledge and ability to cope with other employees. This also suggests he suits best for personnel recruitment. The accounting obviously is handled by Sam, who will probably manage to handle the affairs solely on the initial stage. The distribution and sales departments may require additional staff depending on the expected volumes of sales, which leads us to one important point. The absolutely crucial part of such a business is the marketing department. Neither Sam nor George has the expertise to assess the market for the unusual product, so they will need to employ a specialist to conduct marketing research. The suggested structure is primary qualitative research, as it focuses on feelings and attitudes while making use of a small target group (both are within the framework of the said business). Once the research assesses the projected demand, the need for separate distribution and sales departments can be determined. It goes without saying, however, that an extensive marketing campaign is required to promote a product that is unknown in Australia unless the owners decide to rely on word-of-mouth as promotion means, which will severely limit the scope.
One final sensitive point is the question of ownership. It is unclear if “going to business with each other” suggests the structure of the partnership, which is also preferable to a company, offers similar liabilities and control but requires a separate Tax File Number. Considering only George has enough assets to start a business, it is logical to assume that he would employ Sam as a senior manager if they can come to terms with it.
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