Mcgee Cake Co Essay example

Betty Wilson’s venture of opening a Christian Coffee House in Belmont, NC, presents her with abundant opportunities in selecting a business form. She is considering the following types of entities: 1) franchise, 2) sole proprietorship, 3) partnership of some sort, 4) corporation of some sort, 5) LLC, or 6) even as a joint venture. We will briefly explore each business option and give Betty concise recommendations as to what business form to pursue as well as what business partners to engage.

There are three types of business entities: sole proprietorship, partnerships, and corporations. Sole proprietorships are businesses owned by an individual person. They are easy to form, but are not taxed. Instead the individual business owner is taxed on any monies acquired on behalf of the business (Kubasek, 2012. Partnerships are businesses that are owned by more than one individual owners. The big thing about partnerships is that each partner is personally responsible for the acts of the other partners in the business . (Kubasek, 2012 Corporations are businesses owned by multiple people to include shareholders (Kubasek, 2012). They can sue and be sued and are subject to a host of rules and regulations set forth by the government.

When it comes to partnerships Alex, Bill, Carl, and Devon will have two options- a general partnership or a limited partnership. Partnerships are beginning to be a business form of the past. Once upon a time, partnerships were “the default form of business and provided the benefit of pass-through taxation, but lacked the important feature of limited liability” (Chrisman, 2010, p. 465). In a general partnership, each partner associated with the entity will be held liable for their own business decisions as well as

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When looking at liability, creating an LLC will limit the owner’s exposure to just his invested amount. This will legally shield his home, bank accounts, family’s property and other personal assets from seizure or liquidation in the event the company is held responsible for any of the situations mentioned, such as a cabinet falling or subcontractor failing to perform. It would also protect him in the event the expansion of his company fails, and a worst case scenario of the company going under.

It would also be beneficial to set up a limited liability company. (LLC) A LLC limits the partner’s liability to your basis in the company

Sundae Magic, LLC, will be classified as a Limited Liability Company (LLC) due to the personal asset protection and federal taxing procedure this designation provides to its managing members. We will chose to be taxed as a disregarded entity during the start-up phase and will reevaluate this option, considering a corporate tax status, after the business has completed two years of operations. The managing members will consist of myself, Luz Kanwar with a 60% interest in the business, and my business partner Philip Walker with a 40% interest in the business; financial distributions will correlate to percentage of ownership.

Limited Liability Company (LLC) combines the tax advantages of a partnership with the limited liability aspects of a corporation. LLC’s are governed by the Uniform Limited Liability Company Act (ULLCA). All members of the LLC enjoy limited liability unless there is serious misconduct is committed by said member(s), or a member fails to follow through on an obligation. All this should be outlined in your preformation contract. You will have more flexibility with taxation and options on how to manage the company. It would be advisable to also have an Operating Agreement. This will dictate how management will be hired and fired, division of profits, how to transfer interest in the event a member chooses to opt out or dies. What steps to take in the event of dissociation of a partner, and if it causes the dissolution of the LLC. Most importantly how the members vote in the LLC. The weight of the members vote is in accordance with the member’s capital

Waller, J. (2012). Business Formation Benefits and Risks: LLC most flexible, corporation most protective. Alaska Business Monthly, 28(6), 20.

A partnership is the best form of business given Shania’s situation. She has support from all angles that want to help her Christian coffee shop be a success. A limited liability partnership is best suited for Shania because of her possible partnerships with her husband, sister, and neighbor. According to the Limited Partnership (2015) article, this form of business is a “voluntary association where one or more partners contribute capital only, and those partners play no role in management.” Her husband wanted to make a contribution to Shania’s business but not in the lane of management, so by using this partnership he can still contribute his capital and maintain his partnership. The liability is limited to the amount of capital that the partner contributes. As a “silent partner” Marvin can make investments with the company, but not have any voting power or control over day-to-day operations.

A Limited Liability Company (LLC), as the name states, has the ability in keeping your liability limited as a professional owner. This is fundamental in protecting your personal assets by separating them from your business assets. In choosing to run a LLC company, we have agreed that a manager-managed business would be conducive to our field of industry. Although one person will have the authority in overseeing the daily tasks of running the business, all non-managing members will still have an input in all decisions in regards to the enterprise. Contract negotiations and employment are just a few of the joint duties of all members. Running an LLC has many advantages like flexibility, limited liability in business related debts, pass-through taxes, and reliability standing. However, with perks there are always some downfalls, such disadvantages consists of being subjected to self-employment tax or if a member departs the LLC ceases to exist, although an Operating Agreement can reverse this challenge. As you can see, running an LLC has more pros, out weighing the cons of such companies.

What concerns would you have about operating this business as a sole proprietorship if you were Stan? What alternative form of business organization would you recommend and why?

Every business that is created requires specific roles, with specific people, that have specific strengths and passions. In the case of Shania’s business, she has several friends and family that have voiced a willingness and interest in playing a part of seeing that business come to fruition. First, there is Shania’s husband, Marvin, who has said that he is willing to contribute financially to the business, however he has no intention of operating or managing the business. In the State of Colorado, community property does not apply, however there does exists the concept of marital property (Martin, 2010). I would advise Shania that any property transferred between her as an individual and the LLC might be considered marital

An LLC however allows for the business to be recognized because it requires special paperwork to be filed annually with the state government, in order to operate. Additionally, there is also less risk involved. Cake Dash would be treated as its own separate entity in terms of its debts. This means that if for any reason Cake Dash was unable to meet its financial obligations the owner would not be personally liable for them. The owner would only be held personally liable if a case arose in which the negative action would not have occurred had it not been for the owners’ actions. This would be in cases such as fraudulent or illegal actions taken by the owner, or if the owner pierced the corporate veil and used the company to pay for personal expenses. Aside from these particular situations the owner is able to operate without concern of being personally sued. Given that the owner of Cake Dash is concerned with taxes and liability, an LLC seems like the optimal choice for establishing the business under.

As with any kind of business formation, there will always be, to some extent, negative aspects associated with the creation. To this date there is no perfect form of business entity. When deciding on which entity is best suited for a business, there are many things to be considered. Prior to deciding on a business structure, some major points to be thought about are both the legal and tax ramifications associated with the entity chosen. Another criteria that should be considered are the costs connected with the entity type. These cost include the cost of formation as well as any continuing administrative cost that may be incurred. (“Choose Your Business,” 2011)