Avoid Operating Your Food Business Under Partnership and Proprietorship

Your choice to operate your business as partnership or proprietorship will eventually dictate how you meet you tax obligations liability and even losses and profits. Running your business as such makes the shareholders liable for severe losses in case of massive loss for example as a result of the business collapse.

However, when running your food business for example as a Private limited Company, you get to enjoy several benefits including the following;

Flexibility in Management

When you choose to operate your business as a Private limited company, it gives you room to create your management strategy. For example, you as the firm members can mutually agree on the best operating criteria. This ensures that the agreement accepted as the foundation for operating the business doesn’t infringe on some members only.

There is Limited Liability

Unlike sole proprietorship which doesn’t differentiate the owner and the business as different entities, a Private Limited Company separates the two parties. This fact is of enormous benefit as it ensures the company members personal assets are not affected in any way by the business debts.

However, as a partnership structure in food business, a lawsuit to the enterprise or losses would give right not only to the business assets but even the business owner’s personal properties. This is because a sole proprietorship or partnership does not draw a clear line between business properties and personal properties.

Ease of funds access

When you opt to operate your food business as a sole proprietorship only, raising of capital and funds is limited to savings, personal assets, and salaries. However advancing your business to a corporation level gives you the ease of pulling more resources which when pumped into the companies returns a higher level of gain.

A thriving food business operating as a Private Limited Company, for example, is likely to attract investors. Although pulling up resources under partnership is possible for example through loans, it isn’t as fast and efficient like selling of stock. Furthermore, a Private Limited Company gets to have more trust in the business world as compared to sole proprietorship and partnership.

Permanency of the business

In the event of death of directors, the companies shares and assets, in general, can be willed to a family member and hence it ensures continuity the business.

Less process involved to transfer the business ownership

Several reasons may necessitate the transfer of business. However changing of ownership in a sole proprietorship and Partnership case is more involving since it requires;
• Business evaluation procedures 
• A contract
• A legal representation

On the other hand, in the case of a company the process is less involving; all that is necessary is floating of the companies shares on the stock exchange market for a willing buyer.

In summary, all factors having been taken into consideration, operating your food business is very rewarding when not done under partnership or proprietorship. As this will ensure that the business owner and his company are two separate entities. Making the choice to turn your food business to a Private Limited Company will save you from many financial and legal troubles in future. Private limited companies are more reliable, stable and generally accepted within the business world.

PS: FSSAI License is also important if you are starting a food business!

Photo Credit: Unsplash

Show your support

Clapping shows how much you appreciated Aditya Anand’s story.