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The Flower Fairy Tale is a small business startup, which was established this year. It presents a luxury flower boutique, which differentiating feature is supplying a variety of designer bouquets. The core audience is considered to be the people with upper-middle and high income. At the moment, there is only one offline branch office and a website for online orders. There is no contract with a delivery company, and the bouquets are sent by taxi appliance. The owner is determined to run the business without attracting any partners. Moreover, she is unwilling to have employees for approximately the first five months and intends to arrange and sell flowers personally. The investments in purchasing the material and fridges, refurbishing premises, installing the necessary equipment, and promoting social media and offline advertising are estimated at 6.000$. The expected profit until the end of the year should cover all the expenditures. This way, the purpose of this paper is to analyze the aforementioned organization, propose the best form of business, and outline its advantages and disadvantages.
The founder does not have a plan of further expansion of the boutique, therefore, the most appropriate option for this early stage is registering sole proprietorship. It implies the most uncomplicated structure of all the other forms. As the owner does not intend to employ florists, there is no necessity to register with Internal Revenue Service (IRS) (Maraj, 2020). Social Security Numbers and tax ID are a sufficient range of documents for opening the boutique. In addition, this form does not involve incorporation for deducting organization expenditures. Proprietors are not allowed to pay the salary for themselves, but they can count and withdraw the sum they require. As for the taxes, the owner is responsible for covering the taxable profit of the boutique, and this aspect does not regard the fact whether the business is successful or detrimental (Maraj, 2020). It is worthy of note that predominantly founders have to cover both federal income tax and Social Security and Medicare tax.
There are particular benefits and drawbacks of a sole proprietorship, and the positive points include the simplicity of this form of business. It is easy for an inexperienced enterpriser to understand the scheme and start working as soon as possible. Furthermore, a sole proprietorship does not require separate business tax, which is a significant advantage as compared to the other options. Finally, payroll is not an essential part of running such a small business in case of the absence of employees. Nevertheless, some downsides of this form of business exist, and they should be taken into consideration. Firstly, all the incomes of an organization are subjected to Social Security and Medicare tax. Secondly, in case if LLC is not registered, the founders personal assets are not secure. For this reason, process documentation of LLC might be a beneficial opportunity for proprietors for not being personally liable for claims.
In summary, sole proprietorship appears to be a satisfactory solution for small and one-owner businesses. For this reason, it perfectly matches the requirements of the boutique The Flower Fairy Tale. It would allow the owner to start selling in the nearest future without the necessity to cope with registration hardships. However, the possible expansion of the flower boutique is apparent, so this decision would be effective in the short term, during the early stage of development of the business. In order to achieve higher results, it is essential to establish more branches, employ florists, and, therefore, reform the organization.
Reference
Maraj, N. (2020). Sole proprietor vs. LLC vs. S Corporation vs. C Corporation | Legal & tax differences [Video]. Web.
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