Assignment 2

Small Business Management and Entrepreneurship

Questions
a) Put yourself in Sandeep's shoes. Discuss the advantages and disadvantages of
organizing a business as a sole proprietorship, a partnership, or a company.
Think of all the critical success factors such as access to financing facilities,
liability conditions, ease of doing business, future growth possibilities etc. and
come up with your decision.
The advantages and disadvantages of sole proprietorship are as listed below:
Advantages:
 Easy to establish and relatively cheap to setup.
 Total control over the business.
 Prompt and flexible decision making.
 Few regulations.
Disadvantages:
 Unlimited liability.
 Limited resources and capabilities.
 Periodic renewal charges.
 Lack of continuity.
The advantages and disadvantages of partnership are as listed below:
Advantages:
 Easy to establish.
 Larger pool of resources compared to sole proprietorship.
 Flexibility in decision-making compared to in companies.
Disadvantages:
 Chances of conflict among partners and lack of continuity.
 Unlimited liability.
 Periodic renewal charges.
 Sharing of profits.
The advantages and disadvantages of a company are as listed below:
Advantages:
 Limited liability.
 A separate legal entity.
 Perpetual succession.
 No requirement of renewal on an annual basis.
Disadvantages:
 Comparatively more expensive to incorporate, maintain and wind up.
 High level of reporting and compliance requirements.
 With the advantages and disadvantages listed above of sole propriety, partnership
and company, I would rather go with the sole propriety given the condition in the
passage.
This is because it is the simplest form of business formation. It would be owned and
run by Sandeep alone although he may enlist the assistance of family members. Small
amount of capital is required at the start up stage. Since Sandeep runs this business,
capital may not be a major setback. Decision making is quite fast unlike a corporation
or partnership where wide consultations may be required to approve any decision.
Sandeep gets all the profits unlike in companies or partnerships where the profit is
shared amongst the owners. It’s very easy to form a proprietorship business since
very few formalities and legal requirements are necessary in the formation of this
business.
b) No one can deny the fact that legal aspects of business are often overlooked
but very important from the beginning. Against this backdrop, how would you
select a lawyer for legal services? How would you keep the legal expenses
down?
Lawyer may work on a:
a. Retainer basis.
b. One-time fee.
A good working relationship with a lawyer:
a. Eases some of the risk in starting a new business.
b. Gives the entrepreneur necessary confidence.

Entrepreneur can offer lawyer stock in exchange for the services.

Throughout any legal proceedings, the entrepreneur can run up large legal bills.
Following are some suggestions for minimizing these expenses:
1. Establish a clear fee structure with an attorney before any legal matters are
handled. This may be based on daily charge, a flat fee, or a contingent fee
(percentage of negotiated settlement).
2. Always negotiate for legal fee and other terms and conditions. Negotiation can
result a win-win situation.
3. Establish clear written agreements on all critical matters.
4. Always attempt to settle any dispute rather than litigate.
5. Ask your attorney share forms in electronic format that you can use in routine
transactions.
6. Use a less expensive attorney for smaller transactions.
7. Client inefficiency rewards attorneys: Consult your attorney on several matters at
one time.
8. Be updated with legal developments in your field.
9. Handle matters within your “comfort zone” by yourself.
10. Involve attorney before it is too late or critical. Don’t think that any legal problems
can be solved later.
11. Search for good attorney. Once you find a good attorney, stick with that person.
An attorney who is familiar with your business can handle affairs much more efficiently
than a succession of attorneys, each of whom must research your case from scratch.