Exit Strategies and Legal Issues

The Optimum Type of Legal Structure

The optimum type of legal structure for the consulting and online therapy industries is a sole proprietorship. According to Sherman (2012), a sole proprietorship is the most straightforward and least regulated type of organization. The chosen structure is a good fit for the described firm since it is simple to set up and less expensive than alternative legal structures. The business in question is not taxed separately, which identifies the structure that is being offered. It appears that the sole proprietor must include business profits and losses in their personal income tax return. Therefore, the identified form of structure has a pass-through taxation. Moreover, the owner of the business will be held personally liable for the business. The sole proprietor is also provided with a total control over the operations of the business which means that the owner gets to enjoy all profits. The presented form of legal structure is also suitable for the presented business because the business owner is at liberty to sell all the assets of the firm. Sherman (2012) indicates that no registration requirements are needed to make business transfers hence making the process easier to be undertaken. Despite this, an unlimited personal liability is one of the common downsides associated with the presented form of structure.

Legal Risks

The presented business may face several legal risks. The personal liability risk is one of the main common risk likely to affect the identified business. Unlike in the case of a corporation, a sole proprietorship is associated with the personal liability risk (Pakroo & Stewart, 2016). The presented threat is evident based on the fact that the personal and business assets lack a legal separation. Therefore, if the owner of the business default on important business obligations such as loans, then the business creditors are provided with a right to claim the assets of the business to settle the pending loan. Moreover, the owner of the business can also be held accountable for neglect by the company’s employees (Pakroo & Stewart, 2016). The best strategy for preventing the presented risk is refraining from establishing the business as a sole proprietorship and instead consider a company. Evidently, the unlimited personal liability represents the associated hidden and real costs which are exceedingly higher than the upfront costs of establishing a firm. Through the presented strategy, the business will avoid the associated costs related with the personal liability risk which puts the operability of the firm at a rest.

Operating the Business Before Exit

Before exiting the business, the business will be in operation until all its long-term objectives are accomplished. For instance, the business will be in play until the firm achieves its objective of offering an interpersonal cure to the disabled children and mothers in the community. Additionally, the business will also exit the market after ensuring that the bigger market is engaged through the online platform and cure is administered to the patients. Having in mind what the business seeks to achieve in the long run is an important consideration since it assists the business owner to devise a strategy of exit after having a clear picture of when to exit the business. Besides the presented aspect, the business will also exit the market after having accomplished several objectives for the business owner. For instance, after achieving a lavish lifestyle and being able to establish other side ventures from the income generated from the current one. An exit strategy will also be initiated after the business owner attains a retirement age of 65 years. Apparently, at the presented age, the sole proprietor will not be in the right physical state to continue working and delivering quality work in the industry. As a result, the business can be exited by passing it on to a capable member of the family.

Exit Strategy

An exit strategy should always match the kind of business structure utilized by a business. For instance, selling a self-employed venture may be difficult in comparison to selling a limited company. After accomplishing its long-term objective, the business will exit the sector by having it passed on to the immediate family member. The presented option is considered as an attractive option for the business based on the fact that it preserves the legacy of the business and have its remain within the family. According to Reuvid (2011), the presented exit strategy is majorly recommended in instances where the current business owner put in an extra effort in the process of establishing and sustaining the venture, hence passing it on to a member of the unit will see the continued benefit of the family. The presented strategy is also recommended since it aids in seeing business continuity. Making plans having in mind that the business will be passed on to a family member will encourage the current proprietor to obtain motivation for preserving the legacy of the business to ensure that it continues to benefit the family to remain successful.

References

Pakroo, P., & Stewart, M. (2016). Chapter 7: Risk management. Small Business Start-Up Kit, The: A Step-by-Step Legal Guide. Berkeley, California: NOLO.

Reuvid, J. (2011). Chapter 21: Planning the endgame. Start up and Run Your Own Business: The Essential Guide to Planning, Funding and Growing Your New Enterprise. Philadelphia: Kogan Page.

Sherman, A. J. (2012). Chapter 2: Selecting the best legal structure for growth. Raising Capital: Get the Money You Need to Grow Your Business. New York: AMACOM.