OUGD502 ST1 - Taking Care Of Business - Business Structure

As a group we then decided to move on to decided what business structure we would choose for the studio and further more what this would mean to each individual in the team and so the starting point was to research all of the different business structures we would choose, discuss the options and then as a team decide on which we would pick for the studio;

Sole Trader

Sole Trader is not the most relevant choice for us to set up as due to the fact that we are a group of people that would run the company as equals but this could be an easy choice as one of us could take the lead role in the company and have it as a sole trader in their name and the rest of us work as equals to that person but this could cause setbacks.

Sole Trader businesses are pretty much the simplest way that a company could be run there are no fee's in the setting up of the new company, the account keeping and finance management of the company is a lot more straight forward and all off the profits are kept within the company as all taxes can be claimed back through business expenses making it almost a tax free profit earning.

This method does have its own disadvantages through as the accounting although it is easy must be perfect as in sole trader situations taxes records must be kept very thoroughly and most importantly the persons name that the business is set up in would have sole responsibility for all debts ran up by the company, making them personally liable for these debts.

Partnerships

Within the legal structure term of a partnership there are two major different types on which we could base the company and these are "Ordinary Partnerships" &"Limited Liability Partnerships".

'Ordinary' partnerships

Partnerships have no legal existence as a group of two people but actually a combination of two individual partners with split responsibilities when to comes to the business itself. If one of the partners resigns from the business, dies or declares bankruptcy the company must be dissolved as it doesn't work without the second partner, if the existing partner really wants to keep the company goes extra steps can be taken to keep the company going but this takes a lot of time and effort but a partnership offers a rather simple and flexible way for two people to set up a business. The two people involved with the business are equally liable for any debts related to the company meaning complication can come if the business was to go wrong the possessions of the partners are liable to pay for the debt of the company and have no protection if the business fails. 

Limited partnerships

A limited partnership is set up and run almost identically to the aforementioned partnership but the difference is it is made up of ordinary partners and limited partners. This means that the main difference is that the ordinary partners are jointly liable for the debts that the company might run up and there fore are equally responsible for paying off the whole debt of the company but the limited partners liability is limited to the amount of money that they have put in to the company themselves meaning that the limited partners are somewhat protected if the business runs up a debt and this could cause problems within a business where they may only have liability for a little of the debt and the ordinary partners would be liable for the rest.

Private Company

Unlike the previous examples where the company is very easy and flexible in the setting up process, private companies are structured differently and this can bring benefits but also setbacks in the creation of a company of these type.

In the earlier examples the nature of the company allowed for tax matters to be completed very simply where records are kept and then submitted at the end of the tax year a private limited company they have to be registered with companies house meaning when it comes down to taxes the accounts must be submitted annually to companies house and furthermore audited and this can cause complications down the line. This company structure dictates that the company must include at leaf one member of the company and furthermore one director over the age of 16. This could also cause complications as this is the way it is so that there is one higher ranking individual (the director) who will make the business decisions meaning one of the members would have extra responsibilities over the other members of the studio.

Finance within the company must come from the share holders of the company and all profits made are split between the shareholders of the company meaning that even though a director must be chosen to make decisions, all money made would be split equally between the owners.

Within this choice there is an additional choice to make the business a limited and unlimited company which will directly relate to the liability each member of the company takes if the business end up going wrong related to the amount of shares they hold in the company. As it a private limited company it means that only people within the business can purchase the shares and therefore has a stake in the company. Although these structure doesn't mean that the shareholders are liable to pay for any debts incurred by the company their assets within the company are at threat if the company goes wrong,

After discussing all of the structures as a group we came to a decision to make the company a limited inability company as although this would take more effort in the setting up of the company and that the taxes would have to be done officially through the companies house it means that the benefits of each member of the team would be at best. and the liability for the companies debt woulds not be transferable to the members personal lives meaning do debts could be salvages through the taking of personal properties and that we would each own an equal share of 20%.