Ownership and Succession
A business is effective when the entrepreneur has appropriate ideas and knowledge of handling the business. The business procedures are considered essential and planning for the operations is a vital role in the success of the business. Kodi’s Food Store for All is a new food store business that aims at offering high-quality and healthy food items for everyone across the country no matter their financial status. Ownership and succession are essential in operating a business particularly when it comes to transferring ownership. Relatively, selecting the right legal entity is essential to consider when beginning a business. The choice of ownership has both liability and tax consequences.
Koki’s Food Store for All will rely on sole proprietorship as the most effective form of ownership for its operations. A sole proprietorship is considered as an individual entrepreneur who owns and runs the business where there are no legal distinctions between the business entity and the owner. Considerably, a sole proprietorship is the most suitable form of ownership for the food stores since the initial business set up cost is low, minimal legal requirements and small scale of operations. For instance, there are no state fillings that are required while creating a sole proprietorship thus making it easy to begin and operate. The sole proprietor is ready to conduct the business operations after registration of their name and securing the local business license.
The owner is guaranteed 100% of the business and is liable for any lawsuits that are filed against the business. Additionally, the owner has full responsibility since they report the losses and profits of the business on their tax return. The owner also can mix business and personal assets with unlimited liability. A sole proprietorship will be effective for the food retail store since the owner will keep a record of the success and growth of the business keeping in mind the regulatory requirements.
There is minimal paperwork linked to the sole proprietorship with maximum authority being offered to the management to make all the decisions. The goal of Koki’s food store ownership structure is to maximize flexibility. Considerably, flexibility within the ownership structure comes through considering the personal and unique business needs. A sole proprietorship will boost flexibility within ownership since the concerns, goals and personal financial situations will be similar.
An exit plan is used to close down a non-profitable venture, execute a different business venture when the profit objectives are attained, sell an unsuccessful business, close down a business in the event of severe changes in the market conditions to limit losses. Some of the alternatives to exiting the food store retail business are, merging with another food store, selling the company outright, or passing the venture to a family member. Koki’s Food Store for All will develop an exit strategy before beginning the food store business since the choice of exit plan has a significant influence on the development choices of the business. Since Koki’s Food Store for All is a sole proprietorship, the exit plan chosen will depend on what the entrepreneur wants for the future of the company.
The owner of Koki’s Food Store for All will exit the venture after creating a flourishing food store that can be sold for substantial profit or even as a franchise that might serve several rural communities within the country. This is because the main objective of Koki’s Food Store for All is to become a successful food store business that offers high quality and healthy food products to everyone within the country despite their financial status. This means that after meeting the objective of the business, the owner may decide to exit the business. The intentions of the owner entail running the business until retirement or in the event they want to start a different and more profitable venture.
The exit strategy for Koki’s Food Store for All is to pass the business down to the next generation of family members. Koki’s Food Store owner will pass the business to the family members to ensure its continued growth and success during exit. In the event of failure, the business will liquidate all the assets at the current market value. The success of Koki’s Food store will be monitored on monthly basis. The owner examine the condition of the food store make changes where possible to guarantee that the food sore is operating effectively before passing over to the next generation of family members.
If the plan proposed for success and growth of the food store business is not fruitful, the owner will have to undertake essential actions to exit the venture with less damages. Considerably, it takes three years for a new business venture to begin running into profit. During the three years, the business will be allowed to run into losses up until the break-even point. After, the three years, the owner will determine the condition of the food store quarterly. The owner will guarantee the venture is operating in positive cash flow. In case the business continues to run into losses the exit strategy will be executed to liquidate all the assets at the current market value.
All the acceptable losses will be determined; incase the business exceeds the determined loss and the owner unable to compensate, the process of paying back debt and closing the retail store will begin. In case of any remaining debts by Koki’s Food Store for All, the owner will pay monthly until all debts are fully paid. All the merchandise and equipment will be sold to cover all the outstanding debts.