Mcgee Cake Company

Topics: Corporation, Business law, Legal entities Pages: 2 (538 words) Published: September 12, 2011
An LLC is a relatively new form of business organization whose goal is to operate and be taxed like a partnership but retain limited liability for owners, thus a combination of partnership and corporation. If changing the company organization from a sole proprietorship to an LLC, the advantages are as follows. Since an LLC is functioned as a partnership, the funds raised from other partners will enlarge the scale of the company and relieve the cash flow and capacity problems and enrich its asset, thus further meet the demand for its cakes. Single Taxation. The owners of LLC are still taxed once for their personal incomes, avoiding the corporation situation of double taxation. Limited liability. An LLC retains limited liability for owners rather than unlimited liability of a sole proprietorship. So that Mr. and Mrs. Magee's liability will be no more than their investment which is different from the sole proprietorship case. There are also some disadvantages.

Personal benefits unknown. In an LLC, the profits will be distributed among the partners in proportion of their investments. Mr. and Mrs. Magee probably receive smaller profits though the scale and profits of the company grow. Disagreement may occur. Any failure to spell out the rights and duties of the partners will frequently leads to misunderstandings later on, which has negative effect on the company. Sometimes it's difficult to balance the rights, obligations and benefits between partners.

If changing the business form from sole proprietorship to corporation, the advantages are, Limited Liability. The main advantage to incorporating is the limited liability of the incorporated company. Unlike the sole proprietorship, where the business owner assumes all the liability of the company, when a business becomes incorporated, an individual shareholder's liability is limited to the amount he or she has invested in the company. Separation of ownership and management. Ownership can be readily transferred...
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