Hairdressing And Beauty Salon: Professional Services For Pooches And Different Sections Of Society

Business Structure

Discuss about the Hairdressing And Beauty Salon Business Structure.

The hairdressing and beauty salon is going to provide high quality professional services to its clients. The volume of services and the products used in their provision will be at par with any high-class saloon. The saloon will mainly be targeting the pooches segment of the society. However, in order to maintain a minimum level of cash flow for its sustenance, the saloon will be having different segments catering to the needs of different sections of the society. The level of service and the product used for its delivery will directly depend upon the taste and preference of the customer (Taleb et al., 2015).

In this report, an effort has been made to determine and address various issues that govern the formation and the operation of the entity in the future. These will include the business structure to be adopted, the accounting system to be installed in the organisation etc.

In order to conduct the business any entity has several types of business structures that could be adopted by it for carrying out its operations. The several types of business structures available in front of the entity include sole proprietorship, general partnership, limited partnership, Limited Liability Company, corporation (Collier, 2015). The factors that need to be considered for the choice regarding the proper business structure are as follows:

• The complexity that is involved in the process of formation of the company. In addition, there are also complexities involved in keeping the entity in compliance with all the rules and regulations of the statute.
• The number of the owners of the entity and the type of involvement they exercise in the operations of the entity.
• The type or the nature of the ownership. In other words, whether the owners are individuals or other business entities.
• The liability the entity is going to incur in respect of its customers, vendors and other third parties.
• The capital structure of the company and the ability of the company to attract capital for itself.
• The practices adopted by the entity of rate purpose for its business management.
• One of the most important factors is the tax implication. Depending upon the business structure of the entity the same transaction can have different types of tax implications.

Each of the business structure comes with its own advantages and disadvantages. It is necessary to weigh in the advantages and the disadvantages of each of the business structure to determine the type of business structure that is most suitable for the entity (Libby, 2017).

The advantages of a sole proprietorship business are as follows:

1. The owner of the saloon will be able to keep all the profits.
2. The costs related to starting the business are low.
3. The privacy is maximum in this structure.
4. It is very easy and simple way of managing the entire business.
5. The option of changing the legal structure of the business in the later stages is very easy.
6. It is very simple to wind up the business.

The disadvantages of sole proprietorship are as follows:

1. There is unlimited liability and no distinction will be made between the business and the private assets.
2. The ability of raising further capital for the expansion of the business is very limited.
3. It is very difficult to retain employees having very high calibre.
4. The business will have a limited life.

Those advantages of the partnership include the following:

1. There is more capital available for the operation for the business.
2. The borrowing capacity of the business is increased substantially.
3. It is possible to make the high calibre employees the partners in the business of the entity. ‘
4. There can be an added advantage of tax saving as there is a scope of income splitting in this structure.

The disadvantage of the partnership form of business structure includes the following:

1. The partners of the partnership are liable to an unlimited extent for the debts of the company.
2. There is substantial risk of disagreement and friction among the partners of the business in respect of the management of the entity.
3. There is a relationship of agency between the partners and the firm. That means that the partners are liable for all the actions of the partnership (Andersen et al., 2015).
4. In case a partner joins or leaves the partnership firm all the assets of the entity will have to revalue again and this can prove to be very costly.

The advantages of the company structure of business are as follows:

1. The liability that has to be borne by the shareholders is very limited.
2. It is very easy to transfer the ownership just by selling the shares.
3. It is very much possible that the shareholders can be employed into the company.
4. The taxation rates in respect of a company re more favourable.
5. The capital reach and the skill integration can be very wide reaching.

The disadvantages of the company structure of the business are as follows;

1. It is very expensive to set up a company. In addition to this, it is very expensive to maintain and wind up too.
2. The reporting requirements if the company are very complex.
3. The profits that are being distributed to the shareholders are taxable.

There are various kinds of financial as well as non-financial information that are going to be used for ensuring the success of the business The financial information required include:

The sale that is expected to be generated in the future-

This information is very crucial for determining the revenue generating capacity of the company in the near future.

The various costs that have to be incurred in respect of the day-to-day operations of the entity. This includes the electricity bill the daily wages of the employees, the expenditure to be incurred in respect of the maintenance of the equipment and the cleaning and maintenance of the entity (Francis et al., 2015). The knowledge of the various costs that are involved in carrying out the business will enable the owners and the management to determine the profitability of the business.

Financial Information

There is various non-financial information required too for determining the operational viability of the entity. These type of infraction include

The knowledge about the competitors of the company, the knowledge regarding the tastes and preferences of the customers of the company. The entity will also have to attain knowledge regarding the types of products that are available in the market and the types of products that different segment of the customers would prefer. This will enable the entity to ensure operational efficiency to be achieved (Pettigrew, 2014).

For the purpose for the main accounting and supporting systems, the entity is going to ensure the adoption of information technology in the operation of the entity. All the records in respect of the cash flow coming into the entity on a daily basis will be kept using an accounting software that best serves the needs of the entity.  All the financial transactions will involve the usage of the software and thus facilitate record keeping and preparation of accounts by the entity (Hartman et al., 2014).

The four accounting assumption used by the entity is as follows:

Business entity assumption-

This suggests that the business is to be treated as separate entity from tis owners, creditors, managers and others.

Money measurement assumptions-

This suggests that all the relevant transaction or event is to be recorded by the entity in terms of money.

Going concern assumption-

This suggests that the entity is commencing its operation with a view that it is going to operate for a very long time in the near future (Sekaran & Bougie, 2016).

Periodic assumptions-

This suggests that the entire life of the entity has been artificially divided into periodic intervals.

There are various types of capital expenditure decisions that might be taken up by the entity. For instance, the amount that has to be spending in respect of the land or property for the entity, the various equipment’s and the furniture and fittings to be acquired for conducting the business etc. All these have to be measured reliably for making sure the availability of the capital for acquiring them (Winstanley & Brownlee, 2014).

For the purpose of palling and budgeting both in respect of current and for the future the help of variance analysis will be taken. The expected performance of the entity will be pre-determined if there are any variance found from the budgeted performance then the reasons for such variance will be found and the corrective actions will be taken effectively and efficiently (Gong, 2017).

Conclusion:

It is very important that all the decisions in respect of the entity concerning its business structure, the capital expenditure decisions and all other such decision are taken very objectively by the owners. Each of the decisions has different effect on the operations and the results that is going too achieved by the entity.   

References

Andersen, M. L., Zuber, J. M., & Hill, B. D. (2015). Moral foundations theory: An exploratory study with accounting and other business students. Journal of business ethics, 132(3), 525-538.

Collier, P. M. (2015). Accounting for managers: Interpreting accounting information for decision making. John Wiley & Sons.

Francis, B., Hasan, I., Park, J. C., & Wu, Q. (2015). Gender differences in financial reporting decision making: Evidence from accounting conservatism. Contemporary Accounting Research, 32(3), 1285-1318.

Gong, J. J. (2017). Ethics in Accounting: A Decision-Making Approach.

Hartman, L. P., DesJardins, J. R., & MacDonald, C. (2014). Business ethics: Decision making for personal integrity and social responsibility. New York: McGraw-Hill.

Libby, R. (2017). Accounting and human information processing. In The Routledge Companion to Behavioural Accounting Research (pp. 42-54). Routledge.

Pettigrew, A. M. (2014). The politics of organizational decision-making. Routledge.

Sekaran, U., & Bougie, R. (2016). Research methods for business: A skill building approach. John Wiley & Sons.

Taleb, M. A., Gibson, B., & Hovey, M. (2015). Fifty years of Sustainability Accounting: does accounting for income in business sustainability really exist?. International Journal of Accounting and Financial Reporting, 5(1), 36-47.

Winstanley, M., & Brownlee, M. (2014). Nature, It’s in Our Business: Select Case Studies in Natural Capital Accounting. Sustainable Prosperity (University of Ottawa).