Question

Elise, Adam and Thomas want to establish a restaurant called EATs. Elise is a retired bookkeeper and invested $20,000 in this venture. Adam and Thomas both invested $10,000. Elise is an excellent baker while Adam and Thomas graduated from culinary college and focus on the appetizers and main courses. They will all share equally in the work of the restaurant. Elise, given her background in bookkeeping, will do the financial records for the business.

They heard about a local restaurant owner that went bankrupt due to an outbreak of food poisoning from his restaurant. Until then, Elise, Adam and Thomas planned to register their business name, lease the property, and buy the necessary equipment and supplies. After hearing about the other restaurant owner, they are very nervous and want to discuss what they can do to protect themselves.

i. Identify and briefly explain the (relevant) business forms, including subtypes that are available to Elise, Adam, and Thomas, given the provided facts.
ii. Provide two advantages and disadvantages for each of the business forms that you identified in part (i). Be thorough in your answer.
iii. Which of these business forms would you recommend in the circumstances? Be sure to indicate why you would recommend it and why you would not choose the other(s), including any subtypes.

Answer 1

1.   

• Partnership
• Co operative

Partnership

The above business responsibilties equally divided through the each members,and It is a registered business.So we can use partnership business form.

Co-operative

Earnings devided among the members of a business and no external stake holders are entered in the business so we can also go through the co-operative platform.

2.

Advantages and Disadvantages of Partnership

Adv: Partnership Business can continued upto the death of a partner

Business can easily register

Risk or losses of bisuness are shared through the all partners

Disadv: Investing a huge capital

Decision making is a time consuming process in parntership business

Profit sharing Problems

Advantages and Disadantages of a cooperative

Adv:Sources of financing will be easier

Disadv: Very difficult to seek the additional source of financing

3.

We can use partnership business, Because its a start up firm and the members are equally performed well.so partnership business can share the workload equally and investments are shared equally.A partner can control their emotions conflicts and can developing compromises,This will leads to success of the business.This method obviously use for the above business.

Why not to select cooperative or sole proprietorship business

Co-operative business have unique structure and such type of business have finacial principles values and a proper environment to start a business.so this is not suit for above case.

In sole proprietorship;

• It has liability Risk
• Huge capital
• Credit risk