Draft an answer to Sarah and Wei and include it in your document. Your answer sh

Question

Draft an answer to Sarah and Wei and include it in your document. Your answer should include: 1) your recommendation for the best entity choice; 2) a complete explanation of why this is the best option; 3) a secondary recommendation, in case Sarah and Wei don't like your first option; 4) an explanation as to why this is your second choice (i.e., compare to your first choice and explain why this is not as good, but still an acceptable option).

Sarah and Wei have an opportunity to buy a large parcel of land on the Willamette River, just two miles south of Salem. They want to build an amusement park on the land. Sarah approaches you and says, "Hey, I know you took that BA 333 class, so maybe you can help me figure out what to do. Wei and I need a lot of money to start up our amusement park and buy the land we want, and we're a little nervous about getting sued if someone gets thrown out of our roller coaster. What kind of business do you think we should we set up? We were thinking maybe we could just be partners. We'd prefer not to have anything formal written down--we think that might be bad for our friendship. What's your advice?"

Control Taxation Liability Raising Capital Example Ease and Expense Flow Sole Proprietorship entity to proprietor through Easiest Sole set up, has no special the forms needed full control of taxation; no tax at the entity level business Partnership Corporation (distinguish s- corp) LLC LLP LP

Explanation / Answer

Answer :

Just like private limited, an incorporation subjects a company or a firm to far more scrutiny than LLP's or sole proprietorships. However the biggest disadvantage is the fact the way taxes are filled. In an an incorporation, owner's are taxed again under income tax and capital gains tax and sales tax separately.

1) your recommendation for the best entity choice;

I would Recommend a private limited as an entity .

2) a complete explanation of why this is the best option;

- Private Limited

Advantages : In a private limited company, the firm is a legal entity in itself. Thus the insolvency or the firm's financial or legal liabilities won't effect the owner's personal assets. The other major advantage is that the firm can continue to exist even after the owner's demise, since its a legal entity of its own.

Disadvantages : Private limited companies are subject to far more scrutiny than LLP's or sole proprietorships. Their tax filings are reviewed more rigorously. They're required to hold meetings on a regular basis along with records or notes from the meetings.   

3) a secondary recommendation, in case Sarah and Wei don't like your first option; 4) an explanation as to why this is your second choice (i.e., compare to your first choice and explain why this is not as good, but still an acceptable option).

As a secondary option i would recommend a corporation

- Incorporated or INC / Corporation

Advantages : Just like a private limited organisation an incorporation give the company its own legal identity, thus shielding the owners from legal and financial liability and just like private limited companies, the firm can continue to exist even after the owner's demise, since its a legal entity of its own. The biggest advantage however is the fact that raising capital is far more easier for incorporated companies due to its legal format.

Disadvantages : Just like private limited, an incorporation subjects a company or a firm to far more scrutiny than LLP's or sole proprietorships. However the biggest disadvantage is the fact the way taxes are filled. In an an incorporation, owner's are taxed again under income tax and capital gains tax and sales tax separately.

Ease & Expense Control Taxation Liability Raising Capital Example Sole Propritership Its extremely easy and inexpensive to open a sole proprietorship since the proprietors only needs a bank account to operate a sole proprietorship By definition the sole proprietor has complete control over his business. The sole proprietor can either pay income tax or capital gains taxes based on the format of his earnings or business model. The sole proprietor takes the full liability of his business and his business does not have a legal entity of its own. Raising capital is extremely difficult for the sole proprietor since equity cannot be given out to investors and since the business isn't an entity in itself. Partnership On an average it costs about 25$ per partnership in the United States. All partners have equal control over the business and decisions can be taken with autonomy unless there's a clause in the agreement that states otherwise. Each partner can file their taxes individually if they choose to do so. All partners have unlimited legal liability. Which means that they can be held accountable for the actions of the organisation or the business. Raising capital is difficult for a partnership since the business isn't an entity in itself.   Corporation Corporations costs between 300 $ - 400 $ for registration in the United States. A Corporation firm can continue to exist even after the owner's demise, since its a legal entity of its own.

Just like private limited, an incorporation subjects a company or a firm to far more scrutiny than LLP's or sole proprietorships. However the biggest disadvantage is the fact the way taxes are filled. In an an incorporation, owner's are taxed again under income tax and capital gains tax and sales tax separately.

Just like a private limited organisation an incorporation give the company its own legal identity, thus shielding the owners from legal and financial liability and just like private limited companies, The biggest advantage however is the fact that raising capital is far more easier for incorporated companies due to its legal format. LLC LLP LLP's cost somewhere between 600$ - 800 $ LLP's give each partner equal power , which means that any of the partners can take decisions independently. Each partner can file their taxes individually if they choose to do so. All partners have limited legal liability. LLPs have the same problem as partnerships and sole proprietorships. Since the partners have limited liability and the business does not have a legal entity, raising capital is difficult for LLP's LP Limited Partnerships costs between 650 $ - 750 $ to register themselves in the United States . All partners have equal control over the business and decisions can be taken with autonomy unless there's a clause in the agreement that states otherwise. Each partner can file their taxes individually if they choose to do so. All partners have unlimited legal liability. Which means that they can be held accountable for the actions of the organisation or the business. Raising capital is difficult for a limited partnership since the business isn't an entity in itself.  

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.