The New Bakery’ Business Structure in Australia

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Table of Contents

The general partnership
Advantages and disadvantage of a general partnership
Limited Liability Partnership (LLP)
Advantages and disadvantages of LLP
Conclusion
References

The general partnership

Having identified the supply gap in the new type of bread in Australia, Sam and his partner George have a chance to create the demand for the product, and potentially become the sole producers of the unique product. It is divine for the two business persons to go into a partnership business structure (SBA, 2014). A partnership would be the best business structure for their new bakery because each of the partners has unique assets required by the new business.

While George has available cash to start up the business, Sam has ample knowledge and skills in accounting, which will come in handy in budgeting for the business and keeping track of the financial performance of the business. The experience gathered by George in working at a bakery will also come in handy in the management of the production process. George and Sam have a better chance of succeeding if they engage in a partnership business.

A general partnership would work for the new bakery. This business structure entails two people co-owning a business developed to generate profits. In this business structure, both parties involved have to bring assets to the table before the business can start. Assets include capital, intellectual property, and material assets for the business. George and Sam are in a perfect position to execute a general partnership because they need each other to implement their business idea.

The two business persons complement each other’s strengths and weaknesses, and together they have the ability to make a strong foundation for their new business. In general partnerships, the partners normally build their business without any formal partnership agreement (Spadaccini, 2009). The partnership is normally sealed through a handshake because they usually involve close friends. It is also possible to have a signed agreement between business partners for responsibility purposes.

George and Sam should write an agreement and sign it in the presence of an attorney to ensure that there are terms involved in their partnerships (SBA, 2014). As it appears, their new businesses will have to be managed by both partners, and they must have ground rules on their individual responsibilities in the company. A written agreement in the general partnerships will also attract a professional atmosphere between the partners, and this will provide George and Sam with a platform away from their friendship.

Advantages and disadvantage of a general partnership

A general partnership structure in business eliminates the need for lengthy legal paperwork prior to the starting of a business. It saves partners the time required to pursue an agreement signing, and the cost of hiring an attorney to review the agreement. The entire process avoids hectic formalities. The main disadvantage of this business structure is that both parties in the general partnerships are accountable for their partner’s irresponsibility in the business.

It is a risky business for structure and for George and Sam’s case, irresponsible behavior may lead to a big loss, especially for George. For this reason, they should look into a more secure structure. A general partnership may provide loopholes for either of the members to become negligent in their workstation (Spadaccini, 2009). The partnership in question provides a unique situation whereby one of the partners has monetary assets, whereas his counterpart only has intellectual property; thus, a structure that has lesser risks should be applied.

Limited Liability Partnership (LLP)

A limited liability partnership shares principles with a general partnership, but there are terms and conditions involved in the partnership. This business partnership dictates that partners have a signed agreement with the conditions that exempt either of the members from being held accountable of their partner’s negligence in the business process. This form of partnership compels the members of the business to uphold ultimate competence in their business processes (Business Licensing Service, 2014).

It also has provisions clearly highlighting the responsibilities of the partners. In the case study in question, it is clear that George has more to lose in case the business fails. He is the sole provider of the start-up capital for the business; hence, he should avoid the risk of losing it through his partner’s incompetence. This business structure is popular among professionals looking to form partnerships with their friend, and this is the exact case between George and Sam. While George is an expert in operating a bakery, Sam is a professional accountant. The two partners should invest in a limited liability partnership to ensure they are both motivated to protect the business from failure influenced by their negligence.

Advantages and disadvantages of LLP

The provision that the negligent partner is responsible for the consequences that follow is the main advantage of this business structure. The legal agreement places the partners in a situation where they must employ their highest competence level in their work stations in a new business. The new business for George and Sam is bound to face the usual start-up challenges like harnessing a large market share to hasten the attainment of a breakeven point for the bakery.

These challenges may lead to losses if either of the parties fails to deliver their required effort level. Using an LLP structure will compel the partners to work hard toward the success of their business (Business Licensing Service, 2014). The disadvantage of this business structure is that it may lead to conflicts between partners when the business entity faces unavoidable challenges. The parties involved may blame each other for failure, whereas the underlying issues do not necessarily emanate from their negligence.

Conclusion

George and Sam have a unique opportunity of introducing a new product to the Australian market. Their business idea is viable because they have a chance to harness a large market share, and compete aggressively with the existing bakeries. Their individual assets for the new business are also unique, and this implies they have to fall into a partnership in their new business.

George’s money and skill in working at a bakery are essential for the start-up process, and Sam’s professionalism in accountancy is required to keep the business in line financially. The partnership is bound to yield success if the two business persons are committed to achieving growth. A general partnership may work if both partners have the passion required to help them maintain high performance and responsibility, but a limited liability partnership would be more plausible.

References

Business Licensing Service: Types of business structures. (2014). BSL. Web.

SBA: Choose your Business Structure.(2014). Web.

Spadaccini, M. (2009). The Basic of Business Structure. Entrepreneur. Web.

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