Tony Matheson plans to graduate from college in May 2012 after spending four yea
ID: 2362650 • Letter: T
Question
Tony Matheson plans to graduate from college in May 2012 after spending four years earning a degree in sports and recreation management. Since beginning T-ball at age five, he’s been actively involved in sports and enjoys the outdoors. Each summer growing up, he and his would spend two weeks at a father/son outdoor camp. These fond memories are part of the reason he chose his major. He wants to remain involved in these outdoor activities and provide others with the same adventures he was able to share with his dad. He decides to start an outdoor adventure company. However, he’s not sure he has the business background necessary to do this.This is where Suzie Ramos can help. Suzie also plans to graduate in May 2012 with a major in business. Suzie and Tony first met their sophomore year and have been friends ever since as they share a strong interest in sports and outdoor activities.
They decide to name their company Great Adventures. They will provide clinics for a variety of outdoor activities such as kayaking, mountain biking, rock climbing, wilderness survival techniques, orienteering, backpacking, and other adventure sports.
Required:
1. What are the three primary forms of business organizations Tony and Suzie might choose for Great adventures? Explain the advantages and disadvantages of each. Which form do you recommend for Great Adventures?
Explanation / Answer
The three forms of Business organizations are a) Sole proprietorship : A business structure in which an individual and his/her company are considered as single entity for tax and liability purposes. b) Partnership: A partnership is an agreement between two or more people to finance and operate the business. c) Corporation: The most common form of business organization, which is chartered by a state and given many legal rights as an entity separate from its owners. Advantages of Sole proprietorship: 1) Quicker tax preparation: Filling your taxes as a Sole proprietor is generally easy than a Corporation. 2) lower Start-up-costs: The cost of setting up the business is very low compared to other forms of business. Disadvantages of Sole proprietorship: 1) Personally liable: Your small business in the form of a Sole proprietorship is personally liable for all the debts and actions of the company 2) Difficult to raise capital: Raising capital is difficult when compared to a Corporation. Advantages of partnership: 1) Partnerships are relatively easy to establish 2) The ability to raise funds is greater in partnership because two or more partners may be able to contribute more funds. Disadvantages of Partnership: 1) Business partners are jointly and individually liable for the actions of other partners. 2) Partnership have a limited life; It may end upon the withdrawal or death of a partner. Advantages of Corporation: 1) Stockholder's are not liable for corporate debts. 2)The Corporations have continuous life. The life of a Corporation , unlike that of a Partnerships and Sole proprietorship, does not expire upon the death of its stockholders or officers. Disadvantages of Corporation: 1) Involves higher cost of set-up than the other two forms of business organization. 2) A corporation can only be created by filing a legal documents within the state.But Sole proprietorship and Partnership business can commence and operate without any formal organizing and operating procedures. Great Adventures is a form of Partnership business because Tony and his friend are both starting up this business together.