Based on economic principles and real-world examples, recommend the
most suitable form of organization for the following two different types of
businesses:
1. A technology startup aiming for rapid growth
and
2. A local family-owned restaurant seeking stability and community
engagement.
Justify your recommendations with clear economic rationale and provide.
specific examples for each to support your arguments. Please only use
types of businesses covered in Unit 4 lessons. Which are Sole Proprietorship, Partnership and Corporation
1. For the technology startup aiming for rapid growth, a corporation would be the most suitable form of organization. A corporation offers limited liability protection to its owners, which is important for a high-risk venture like a technology startup. This means that the personal assets of the owners are protected in the event of business failure or lawsuits. Additionally, a corporation has the ability to issue stock and attract outside investors, allowing for easier access to capital for rapid expansion.
One example of a technology startup that benefitted from being organized as a corporation is Google. Google was able to raise significant capital through the issuance of stock and attract top talent by offering stock options as part of compensation packages. This helped fuel its rapid growth from a startup to a multi-billion dollar company in a relatively short period of time.
2. For the local family-owned restaurant seeking stability and community engagement, a sole proprietorship would be the most suitable form of organization. A sole proprietorship is the simplest form of business organization and is easy to set up and maintain. It allows the owner to have direct control over decision-making and operations, which can be beneficial for a small, family-owned business looking to maintain stability and engage with the local community.
An example of a successful family-owned restaurant operating as a sole proprietorship is The Anchor Oyster Bar in San Francisco. The restaurant has been operating as a sole proprietorship for over 40 years and has established a loyal customer base in the local community. The direct involvement of the family owners in day-to-day operations has helped maintain the restaurant's stability and community engagement over the years.