According to case scenario, they must choose an LLC structure for their restaurant as it will help to protect both Mohan and Stephan from personal liabilities. For instance, if a customer suffers an allergic reaction to some food item, in that case, lawyers will not run towards their home. Unlike other business structures, the amount of money capital they will invest in the restaurant will be at risk. It will be the minimum risk for them to bear at worst conditions. If they are looking to establish a chain of restaurants in Australia then they must open individual LLC’s for each location.
The best part about this structure is that it does not require a board of directors and therefore there is no need to conduct shareholder meetings and managerial formalities (Terano, 2019). In addition to this, Mohan and Stephen can go beyond to earn the maximum profit that they are looking for as shareholders will not come and crave for their percentage. It is an inherent benefit from the business part. Another advantage of this form of business structure is that it gives tax treatment flexibility. They can tax profit as a corporate entity. It means that the company need not have to pay any tax on the corporation's profit as well as on the owner’s income.
It is seen that most of the corporate organizations use the pass-through option but Mohan and Stephen can also select c- corporation tax structure and can save money by funnelling tax profit back into the business. The only disadvantage of LLC corporations is that they cannot make them public. If both Mohan and Stephen plan for launching any other restaurant the best way out will be to start with LLC corporation and then switching it to C-corporation (Yen et al., 2020). Apart from these, it is important for both the individuals to trust one another as openings a restaurant involves risk, efforts and sacrifices.
It a restaurant one there will be ups and downs and both Mohan and Stephen must be ready for all of these before itself. Both of them must keep similar goals and visions for the restaurant to get rid of the clashes because a small misunderstanding can lead to business failure. A restaurant will not be able to survive if Mohan and Stephen will not agree to a single vision. Both of them must have the opportunity to access the right funds and possess good social and management skills for creating passionate and creative food restaurants that they have dreamt of (Schell, 2020). They must also identify and leverage the skills and expertise of both individuals. It would be easy for them to handle if they define job roles and accountabilities. They must also keep partnership agreements with them to be on the safer side of getting fraud.
Since both the individuals are new to business thus they must be aware of these business fundamentals. It can be ensure that the provided information will help both of them to establish a risk-free restaurant in the area that they have selected.
Terano, T. (2019). A Formal Model of Managerial Decision Making for Business Case Description. Evolutionary Computing and Artificial Intelligence: Essays Dedicated to Takao Terano on the Occasion of His Retirement, 999, 21.
Schell, J. M. (2020). Private equity funds: Business structure and operations. Law Journal Press.
Yen, B. T., Mulley, C., Burke, M., & Tseng, W. C. (2020). Parking and restaurant business: Differences in business perceptions and customer travel behaviour in Brisbane, Queensland, Australia. Land Use Policy, 92, 103818.
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