While attending college, Julie Smith earned extra money by using her cooking ski
ID: 430627 • Letter: W
Question
While attending college, Julie Smith earned extra money by using her cooking skills to cater special parties and events. After graduation, Julie decided to turn her part-time work into a full-time business and if things go well, she plans to expand in the future. Julie wants to maintain control of the business.
Identify the best way she should organize and explain the reasons why you selected this method.
Discuss fully the following statement: “Corporations are not really run by their owners.”
Explain these types of business ownership including advantages and disadvantages of each: sole proprietorship, partnership, and corporation.
Terri Jones asks for your advice in opening a new business. She plans to provide tax-related services to individuals and small-business owners in her community. She wants an attractive means of starting and operating her business with support, name recognition, and a reasonable hope of succeeding. She wants to preserve her independence as a small business owner, but still enjoy some of the benefits of “bigness."
What would be your advice as to the kind of business Terri should look at opening and why?
Explanation / Answer
This is depended on the size of the corporation and the ownership structure. If the corporation is large then it is less likely to be run by the owners. It is not run by the owners usually because if is in portobello for one person to be involved to such a strong degree in the business. Of the corporation is large then it needs bureaucracy to run it. It is also important to provide general direction for the firm and it is difficult for the owners to run such large number of stockholders.
The corporations are run by management and the shareholders select this. They are listed by the companies and the decisions are usually taken after consultations with the important shareholders.
Sole proprietorships, partnerships, LLCs and corporations are different tiles of structures and it is important to understand the advantages and disadvantages to find the best fit for the company.
The Sole Proprietorship
The sole proprietorship is an important business form which is not a legal entity. It refers to the natural person who tends to own the business and is usually responsible for one's own debts. The working can be under the owner and the business can also be done under fictitious name.
Advantages
It is popular as it is simple and it has easy setup and nominal cost.
There is only requirement for registering name and securing licenses that are local
Disadvantages
There is liability for all the business debts only on the owner.
If there is any personal liability and financial trouble then the lawsuits are faced by the business owner.
The debts need to be paid by the owner. It can turn into complex business form.
The Partnership
A partnership is an important business form which has engagement of two or more people for profit.
Advantages
The association is simpler with the involvement of two or more people.
It provides flexibility and simplicity for the organization.
There is liability and degree of protection.
Disadvantages
There is unlimited personal liability for losses and debts.
Individual partners end up taking responsibility even for the other person's mistakes.
Corporations are important forms for raising investment capital.
There are only stock sold for shares. The purchase is by shareholders by paying for the property of the stock to be owners in the corporation.
Advantages
There is protection from personal liability and obligations
There is reliable body for legal precedence
It is important for eventual public companies.
Disadvantages
It needs annual meetings and owners need to observe certain formalities.
It is very expensive compared to sole proprietorship and partnerships
Terri should think of opening partnership structure with limited liability. This will be useful for her business and fulfill all the necessary requirements.
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