In determining what business format would be best for the four friends Alice, Betty, Claire, and Dan in their development of We BakeUm Fresh business, multiple aspect needs to be addressed. The first aspect the four friends need to decide upon is what role each wishes to have within the business and what contribution they will be making. There are five basic forms of business they have to choose from: sole proprietorship, partnership, corporation, limited liability company, or limited liability partnership. After establishing which form of business, they will be creating they will need to find financing for their new business. Which most likely will result in the creditor asking for a form of commercial paper in the shape of a written promise, in which they agree that they will repay the debt. In addition to a written promise the lender will also require something as a security interest; something will be put up as collateral by the person obtaining the loan, in case they fail to pay his or her debt.
The best business form for the four friends who are trying to open a bakery would be a partnership. Within this partnership, Alice and Dan would be the general partner and Clair and Betty would be limited partners. Since the business would most likely take more than a year to set up, involves property valued over 100,000, and a variety of other elements the four friends would need to enter into the partnership with a written agreement. This is because while there is no requirement agreement for a partnership to be written, it is the safest course of action for all participants, because a written partnership agreement writes out the rights and duties of each of the partners. Moreover, almost every stat has a statute of frauds, which...
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...as general partners, they are liable to additional debt and lawsuits the company could face. Additionally, since Claire and Betty would be limited partners, they would be required to have no part in the day to day operations, but would not be held liable for additional debts or lawsuits the business faces. Because neither Dan nor Alice does not own any property that could be used as collateral, for a loan, it is unlikely that they would be approved for any amount of money for a lender unless they were able to use Clair’s townhouse as collateral. However, this would result in Clair losing ownership of her townhouse if the business was unable to pay off their debt to the lender. Since the enterprise would be filed under a fictitious name, We BakeUm Fresh, they would need to a “doing business as” (DBA) certificate. However, no further paperwork would need to be filed.
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