Writing Assignment 1 - FRICKE PDF

Preview

Summary

FRICKE...

Description

Assignment 1 BADM 300 September 13th, 2019 There are lots of different options to choose from when it comes to starting your company, and it can be difficult if you don’t know too much about them. It is important to get educated before you start your venture so neither you nor your business end up in the gutter.

A general partnership is basically more than one person engaged in a business for profit. Since there is more than one person involved, it becomes more complex. There are quite a few pros that come with a general partnership, including partnership agreements, where the rights of each partner can be altered, in addition to flow-through taxation. The one major con that comes along with a general partnership is joint and several liability, meaning that every partner is liable for the entire amount of all partnership debts. Incoming and outgoing liability is also something that comes along with the partnership. This means that when joining the partnership, you are not liable for any pre existing debts, but when you leave the partnership you are liable for what occurred in your time involved.

Next up is a corporation. A corporation is the most common form of a business entity, and they exist separate from their owners. A corporation is owned by shareholders who own shares, or a unit of ownership in a corporation. With corporations, there is limited liability for the owners, but owners can also come and go, as the shares can be transferred. Corporations also have centralized management and perpetual existence, meaning there is really no set termination date of the venture. There are two different types of taxation for corporations, C-Corp and SCorp. Through C-Corp, there is double taxation, meaning that the corporation itself pays income

tax. Through S-Corp, there is flow-through taxation, this means that it is taxed like a partnership, and the taxes flow straight to the owners of the corporation. This is dangerous in a sense that there is a risk in all the profits being allocated to the owners.

In a limited liability company, or LLC, there are two key concepts: flexibility and limited liability of owners, even without observing formalities. The great thing about LLC’s are that they are flexible in both the terms of taxation and management. Limited liability companies can be taxed as either a partnership or corporation. In terms of management, the LLC can be member managed, meaning every member has the right to participate in the management of the organization, or manager managed, meaning members elect a manager to make decisions for the organization. When an LLC is member managed and taxed as a partnership, it looks like a partnership. When an LLC is manager managed and taxed as a corporation, it looks exactly like a corporation.

In George’s case, I believe that a limited liability corporation is both his and his wife's best option. An LLC has plenty of flexibility. Taxation is flexible, as stated above, they could choose to be taxed as either a partnership or a corporation. In an LLC, neither George nor Lucille would be personally liable for the companies debts or other liabilities, as George said he wanted his personal assets to be protected. Overall, I think that a limited liability corporation would most definitely be the smartest choice for George and Lucille to start their business venture....