The case study “Too Hot to Hold” (Katz & Green, 2014, pg. 182), describes a business buying opportunity available to Gwendolyn Bonnefille, a struggling single mother. The business for sale is a small, apparently home-based, hot sauce making business. Sly, the current owner, makes, bottles, and labels the Caterwauling Coyote hot sauce from his kitchen, and then distributes the finished product to gift and specialty shops in Texas (Katz & Green, 2014). In her quest to purchase the business, Ms Bonnefille discovers that there are some inconsistencies between the business’s financial statements and the Sly’s personal tax returns. The case study provides the Sly’s explanation for the discrepancies and provides some information regarding the terms of the business sale. The case study then goes on to ask three questions regarding the Sly’s explanation of the financial discrepancies, the accuracy of the selling price, and other information the Ms Bonnefille should consider prior to making a decision to purchase Caterwauling Coyote from its current owner (Katz & Green, 2014). Although I might not address the questions in order, this essay will address all of these concerns and evaluate whether this purchase may or may not be a good option for the Ms Bonnefille.
According to Katz & Green, 2014, one of the first hurdles in buying a business is finding one that meets the “experience, education, and skills” (pg. 165) of the buyer. Additionally, Katz & Green (2014) point out that when purchasing a business it should be in an industry in which the buyer has some experience. The case study is not specific in this regard. Ms Bonnefille’s current job is in accounts receivable (Katz & Green, 2014), which, in my opinion, is far different from making ...
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Shelly Zumaya (2220 East Hennepin Avenue, Minneapolis, MN 55413) is the president and sole shareholder of Kiwi Corporation (stock basis of $400,000). Incorporated in 2003, Kiwi Corporation’s sole business has consisted of the purchase and resale of used farming equipment. In December 2011, Kiwi transferred its entire inventory (basis of $1.2 million) to Shelly in a transaction described by the parties as a sale. According to Shelly and collaborated by the minutes of the board of directors, the inventory was sold to her for the sum of $2 million, the fair market value of the inventory. The terms of the sale provided that Shelly would pay Kiwi Corporation the $2 million at some future date. This debt obligation was not evidenced by a promissory note, and to date, Shelly has made no payments (principal or interest) on the obligation. The inventory transfer was not reported on Kiwi’s 2011 tax return, either as a sale or a distribution. After the transfer of the inventory to Shelly, Kiwi Corporation had no remaining assets and ceased to conduct any business. Kiwi did not formally liquidate under state law. Upon an audit of Kiwi Corporation’s 2011 tax return, the IRS asserted that the transfer of inventory constituted a liquidation of Kiwi and, as such, that the corporation recognized a gain on the liquidating distribution in the amount of $800,000 [$2 million (fair market value) - $1.2 million (inventory basis)]. Further, because Kiwi Corporation is devoid of assets, the IRS assessed a tax due from Shelly for her gain recognized in the purported liquidating distributi...
One look at the common-size income statements for these companies can tell a story. While Jones Apparel Group was lagging at year ended 1998, even with a restructuring charge on Liz Claiborne’s income statement, 1999 was a different story. Huge growth at Jones lead to revenues double of that one year ago while Liz, while increasing, was quickly falling behind. The growth for both of these companies continued into the year ended 2000, but Jones Apparel Grou...
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There is a range of criteria relevant for a decision of financing a new venture. To construct my list for the evaluation of a new company as an opportunity I have selected to refer to t...
The Body Shop International case is an interesting case study into the miscommunication of owners and stockholder interests with regard to financial conditions. Anita Roddick, the founder of The Body Shop had no financial experience and thought that all she needed to do was expand her business and the financing would take shape as she developed her business. While Anita’s product concept of a natural skin-care line was good; her lack of experience in financial matters took its toll on her business.
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There are over 28 million small locally owned businesses in the United States and 70 % of these businesses are owned and operated by a single person. Owning a small business is not an easy task it takes hard work and dedication, Steve Jobs once said “you need a lot of passion for what you’re doing because it’s so hard”, people don’t realize
Hopson, J. F., & Hopson, P. D. (2014). Making the Right Choice of Business Entity. CPA
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"What are the barrier to entry, inhibitors to growth, and detriments to the health of small business and entrepreneurship today?"
Small businesses have been considered the mainstay in countries around the world. In many European countries for example, the small business has been considered crucial to the success and flourishment of the country in general. Most individuals start upon a small business venture in the hopes of realizing ownership, independent profits and personal success. Small businesses can prove extremely successful when planned properly. Studies suggest that several small businesses, however, close or fail within the first few years of operation. This failure suggests that a majority of small business owners may not have as yet realized the crucial success factors necessary for successful implementation of a small business.
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