Mcgee Cake Company Essay

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Running Header: CASE STUDY 1

The McGee Cake Company: A Case Study



BUS Course


The McGee Cake Company, owned by Doc and Lyn McGee, has been a sole proprietorship company since its inception in 2005 (Ross, Westerfield & Jordan, 2013, p. 18). A sole proprietorship “is the least regulated form of organization” and has allowed the McGee's to run their company
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Advantages and Disadvantages of Changing from a Sole Proprietorship to a Limited Liability Company “The goal of [a limited liability company] is to operate and be taxed like a partnership but retain limited liability for owners” (Ross, Westerfield & Jordan, 2013, p. 6). Thus “[t]he main advantage gained by shifting from a sole proprietorship to a more formal organization [whether it be a limited liability company or a corporation] is liability protection” (Cromwell, n.d., n.p.). Under sole proprietorship the McGee's have “unlimited liability for [their] business debts” (Ross, Westerfield & Jordan, 2013, p. 5). This means that if their business owes creditors and the McGee's are unable to pay with business assets the creditors can demand payment via the McGee's personal assets (Ross, Westerfield & Jordan, 2013, p. 5). In contrast, under a limited liability company the McGee's personal assets would be protected “from business liability” (Cromwell, n.d., n.p.). Additionally, the McGee's must rely on their own personal wealth in an effort to raise equity whereas a limited liability company affords the business “to bring a number of investors and partners” on board in an effort to raise capital (Ross, Westerfield &
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