Business Case Study Essay
Group Sh
MGT 117
4/30/17
Written Assignment #1
1. Should Maria adopt a business form at this stage? Why or why not? What potential problems do you see if she does or does not adopt a business form at this stage?
Maria should decide on a business form as soon as possible for a number of reasons. First, the only form of business organizations that do not require a formal registration with the state are a sole proprietorship and a general partnership. Maria cannot form either organizations since she has limited partners, her parents and her boyfriend Roman, who are not actively managing the business. Even in a general partnership, she will require articles of partnership that states how the profits and losses of her company are to be shared, how the business will be managed, the continuity of the business, and the provisions for …show more content…
If Maria does adopt a business form, what business form is the best for her company? Please explain.
Group Sh recommends Maria to adopt a limited liability corporation (LLC) for the following reasons:
–Limited liability: The key consideration for setting up a LLC is to protect herself and the other members, and to limit their liabilities to the amount invested in the business. Without limited liability, the members don't only lose their investments but are also liable to pay debts from their personal assets. This form of organization is vital for the passive members as they would not want to be liable due to the mismanagement of operating members.
–Taxation: Since partnerships and corporations have different tax regulations, it is important to know how the financials will be affected, based on the business model that Maria adopts. In a LLC, all profits and losses "pass through" the business to each member (Beesley). LLCs are not required to pay an additional corporate tax. Instead, the profits are passed to the members and then each member is taxed individually. Each member can also deduct losses on his or her individual tax
MGT 117
4/30/17
Written Assignment #1
1. Should Maria adopt a business form at this stage? Why or why not? What potential problems do you see if she does or does not adopt a business form at this stage?
Maria should decide on a business form as soon as possible for a number of reasons. First, the only form of business organizations that do not require a formal registration with the state are a sole proprietorship and a general partnership. Maria cannot form either organizations since she has limited partners, her parents and her boyfriend Roman, who are not actively managing the business. Even in a general partnership, she will require articles of partnership that states how the profits and losses of her company are to be shared, how the business will be managed, the continuity of the business, and the provisions for …show more content…
If Maria does adopt a business form, what business form is the best for her company? Please explain.
Group Sh recommends Maria to adopt a limited liability corporation (LLC) for the following reasons:
–Limited liability: The key consideration for setting up a LLC is to protect herself and the other members, and to limit their liabilities to the amount invested in the business. Without limited liability, the members don't only lose their investments but are also liable to pay debts from their personal assets. This form of organization is vital for the passive members as they would not want to be liable due to the mismanagement of operating members.
–Taxation: Since partnerships and corporations have different tax regulations, it is important to know how the financials will be affected, based on the business model that Maria adopts. In a LLC, all profits and losses "pass through" the business to each member (Beesley). LLCs are not required to pay an additional corporate tax. Instead, the profits are passed to the members and then each member is taxed individually. Each member can also deduct losses on his or her individual tax