What form of ownership should be used in this scenario?Donna Smith opened a small retail business two months ago with an idea she gained from an overseas vacation. Donnas customers love her...
What form of ownership should be used in this scenario?
Donna Smith opened a small retail business two months ago with an idea she gained from an overseas vacation. Donnas customers love her product and supply is lagging behind demand. Donna is a very creative marketing minded person but other areas of the business don’t really interest her, in fact she views them as a real chore. Donna needs assistance and has considered hiring an assistant manager but finances are extremely tight and she knows the added salary would place significant strain on her business.
The most logical form of ownership for Smith is a partnership. She should find herself a partner who is strong in the areas where she is weak.
One of the greatest advantages of a partnership is the fact that it allows collaboration. The two (in this case) partners could each bring their own strengths to the business and would both benefit from working together. This would solve Smith's major problem.
Finding a partner would be better than remaining as a sole proprietor and hiring a manager. A partner would be working for a share of the profits rather than a salary. This would mean that Smith would not have to find funds to pay him or her. The partner would be compensated as the firm's finances improved.
By forming a partnership, Smith could bring in the expertise she needs without having to worry about being able to pay a manager.