Business Case Study

Good Essays
1. If Amy follows through with her plan and opens up the restaurant on her own, the type of business she is operating calls Sole Proprietorship.
Sole Proprietorship means that the business is owned and will be operated only by one person.

Advantages of sole proprietorship:
Easy and inexpensive to form: Sole proprietorship is the simplest and least expensive business structure to organize. Costs are minimal, with legal costs limited to obtaining needed license or permits.
Easy pass through taxes: Amy’s business is not taxed separately, so it’s easy to fulfill the tax reporting requirements for a sole proprietorship. The tax rates are also the lowest of the business structures.
Full control: Amy does all decisions about her business. Amy
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Amy tells her rich friend Bob about her project and he thinks it is a great idea. He offers to contribute $20,000 in return for a piece of Amy’s business. However, Bob is a busy doctor who doesn’t have time to be involved in the day to day running of the restaurant. He simply wants to invest his money with hopes of a profit, but does not want to end up losing more than his initial $20,000 if Amy’s business fails. If Amy decides to accept Bob’s proposal to be her partner, in this case this type of business calls Limited Partnership. Also known as a partnership with limited liability. Limited partnership is more complex than general partnerships. Limited partnerships allow partners to have limited liability as well as limited input with management decisions. These limits depend on the extent of each partner’s investment percentage. Limited partnerships are attractive to investors of short-term…show more content…
Because of these issues, corporations are generally suggested for established, larger companies with multiple employees.
For businesses in that position, corporations offer the ability to sell ownership shares in the business through stock offerings. “Going public” through an initial public offering (IPO) is a major selling point in attracting investment capital and high quality employees. Advantages of a Corporation
Limited Liability. When it comes to taking responsibility for business debts and actions of a corporation, shareholders’ personal assets are protected. Shareholders can generally only be held accountable for their investment in stock of the company.
Ability to Generate Capital. Corporations have an advantage when it comes to raising capital for their business - the ability to raise funds through the sale of stock.
Corporate Tax Treatment. Corporations file taxes separately from their owners. Owners of a corporation only pay taxes on corporate profits paid to them in the form of salaries, bonuses, and dividends, while any additional profits are awarded a corporate tax rate, which is usually lower than a personal income tax
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