Email to friend who starting own business Assignment sample

Introduction

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Dear [Insert the friend’s name],

I have perused the details of your business idea and in this mail, I would like to clarify certain important aspects regarding legal structures and market structures that would help you set up your new business venture without much difficulty.

There are primarily four kinds of legal structures, which are as follows:

Sole proprietorship

Essentially, this is the most basic sort of company entity. All gains and losses are the full responsibility of a sole proprietor. The establishment is simple, operations are simplified, and earnings are solely yours. The disadvantages include unrestricted responsibility, difficulties in raising cash, and a higher tax rate.

Partnership

A partnership is an arrangement between two or more persons to do trade or commerce. The benefits of cooperation include improved decision-making, improved operational management, and simplicity of acquiring capital. The disadvantages include the requirement for profit sharing, the absence of a central figure, and the increased likelihood of conflict.

Limited liability company

Through the employment of a limited liability company, owners, partners, or shareholders can minimise their responsibility while receiving the tax and flexibility benefits of a partnership (LLC). There are several advantages, such as: managers and members' responsibility is reduced, the charging order provides greater protection, and management is more flexible as a result. The drawbacks are as follows: The fees and taxes connected with the business structure are the primary drawbacks of limited liability firms. As each state has its own set of rules for LLCs, this might be a drawback.

Corporation

The legal definition of a company separates it from its owners. It can sue, be sued, possess and sell property, and sell “ownership rights” in the form of stocks since it has its own “legal rights” that are separate from those of its “founders” or “owners”. Easy access to cash, increased credibility and the capacity to transfer ownership are all advantages of this structure. Complex management, higher tax rates, and potential conflicts of interest are among the drawbacks.

Among these four, the first two would be the most suitable for you to manage your new business.

Partners may profit from expanded access to operational capital. In contrast to the case of a sole entrepreneur, a partnership may be able to raise the required capital by pooling its resources. With a partnership, instead of a sole proprietorship, which is the same company structure but with just one owner, the entrepreneurs may benefit from the expertise and experience of their co-partners. While operating a business alone is often easy, it can also be a constant battle. This can be simply resolved through the partnership's legal framework, which I recommend you choose between the two.

At this point, you should know that there are four kinds of market structures, which are as follows:

“Pure Competition”: It is a market structure with a high concentration of small businesses competing with one another.

“Monopolistic Competition”: As with pure competition, “monopolistic competition” refers to a structure in which a large number of small businesses compete with each other.

“Oligopoly”: It is dominated by a small number of enterprises, resulting in low levels of competition. They can collaborate or compete with one another to leverage their aggregate market power to increase pricing and profit margins.

“Pure Monopoly”: It exists when a single corporation holds a monopoly on the whole market. The term "firm" and "industry" are interchangeable.

Considering your business idea, it seems that you will operate in a monopolistic market structure since it is unlikely that there will be any other company operating in that region with the same idea as yours. I will analyse the competitiveness of the monopolistic market structure that you will have.

Bargaining power of buyers: it will be quite low since the buyers will not have any better option to get the products/services which you would provide.

Bargaining power of suppliers: it will be quite low since there will be many suppliers who would like to collaborate with you. 

Threat of rivalry: The threat of rivalry will be low in that there are hardly any firms that would operate in a similar model as yours.

Threat of substitute product: Regular cell phones may be regarded as a substitute.

Threat of new entrants: If your firm shows promise and profit, people may try their fortune in this field.

I hope this information will help you set up your business with ease, and also to develop it into a major company within a short span of time.