Question

In: Accounting

Because of your background as a student CPA, two of your long-time friends recently approached you...

Because of your background as a student CPA, two of your long-time friends recently approached you for guidance concerning a new business venture they plan to form. They expect the business to generate a loss of approximately $50,000 during its first year of operations, and profits close to $100,000 annually thereafter. Both individuals will be active participants in the business. They want to know what type of entity to choose:

a C corporation;

S corporation;

or a Partnership.

Choose one of these three entity types above as your recommendation (LLC is not a choice) and support your answer, stating the advantages and disadvantages of that entity. Include in your discussion how the first-year loss and subsequent years’ income generated by the business will affect the business associates’ personal taxes. If you make any assumptions about the business, please indicate. There is no right or wrong answer.

Solutions

Expert Solution

Answer:

Given Data:

Two of your long-lasting companions as of late moved toward you for direction concerning another business wander they intend to frame. They anticipate that the business will create lost roughly $50,000 amid its first year of tasks, and benefits near $100,000 every year from that point. The two people will be dynamic members in the business. They need to realize what sort of element to pick:

a C Corporation

S Corporation

or on the other hand a Partnership.

Answer basing on above data:

Discussing on what kind of element to pick:

*Corporation:

The Corporation today remains the most widely recognized type of business association in light of the fact that, hypothetically, an organization can exist everlastingly and on the grounds that a partnership, not its proprietors or financial specialists, is subject for its agreements. Be that as it may, these advantages don't come free. An organization must take after numerous conventions, is liable to exposure, and is represented by state and government directions.

The rights and obligations of an enterprise are free and unmistakable from the general population who possess or put resources into them. An organization just gives an approach to people to maintain a business and to partake in benefits and misfortunes.

*Advantages:

1.The genuine proprietors are the investors.

2.Investors are not at risk for any demonstration of company.

* Disadvantage:

1.To shape an organization substantial venture is required.

2.The benefits are exhausted at higher rates.

*Partnership:

Parnetship – an association business is framed by an assention between two gatherings where they share the benefits and misfortunes of their business in pre characterized proportions.

*Advantages:

1.More capital is accessible for the business.

2.Liability tremendous on every one of the accomplices.

*Disadvantage:

1.The accomplice's obligation for the obligations is boundless.

2.Each accomplice is additionally subject for the demonstrations of other accomplice.

Basing on the above explanation -

*The best alternative accessible for this situation is the development of a Corporation.

*The consolidation and support cost will be low for this situation and the Corporation can be effortlessly framed.

*Corporation won't push the weight of any individual obligation.

*Additionally, on account of Corporation there will be a set off of misfortune that can be conveyed forward for the following years.

So, Finally its better to pick Corporation.


Related Solutions

Your friends suggest that you take a 15-year mortgage, because a 30-year mortgage is too long...
Your friends suggest that you take a 15-year mortgage, because a 30-year mortgage is too long and you will pay a lot of money on interest. If your bank approves a 15-year, $700,000 loan at a fixed nominal interest rate of 12% (APR), then the difference in the monthly payment of the 15-year mortgage and 30-year mortgage will be   ?(Note: Round the final value of any interest rate used to four decimal places. ) It is likely that you won’t...
Background Patrick, a long-time client of yours, recently sold a few assets from his business. He...
Background Patrick, a long-time client of yours, recently sold a few assets from his business. He brings the following information to you hoping you can help him make heads or tails of it: He sold an old pickup truck for $9,888 cash. He originally purchased the truck 10 years ago for $30,900. Since then, he has performed normal maintenance on it. At one point, he had to replace the truck's transmission for an additional $3,589. (Because you knew about this,...
1) Suppose that you have recently started a new venture with two friends. As you contemplate...
1) Suppose that you have recently started a new venture with two friends. As you contemplate adding employees to your social venture, one of your friends tells you that you need to develop a skills profile to set your hiring priorities. Taking your friend’s advice, develop a skills profile, and explain how it would help you identify the positions you need to fill.
Two friends are considering opening a driving range for golfers. Because of the growing popularity of...
Two friends are considering opening a driving range for golfers. Because of the growing popularity of golf, they estimate such a range could generate rentals of 20,000 buckets at $3 a bucket the first year, and that rentals will grow at 7% a year thereafter. The price will remain a $3 per bucket.             Equipment requirements include:                         Incorporated fee                        $2,500                         ball dispensing machine             $2,000                         ball pick-up vehicle                    $8,000                         tractor and accessories                $8,000             All...
19) Your friends are at it again. This time they are testing H0 : μ =...
19) Your friends are at it again. This time they are testing H0 : μ = 14 versus H1 : μ ≠ 14. They have found that x̅ = 13.5, x̅cu = 14.7, n = 64 and they know σ = 2.5 . a) Do your reject H0 ? Explain. b) Find alpha. c) Find the p-value. d) Find beta if mu is really 14.3.
You are approached by a 3rd year health sciences student who is trying to recruit you...
You are approached by a 3rd year health sciences student who is trying to recruit you to participate in a study of student mental health.  You are told that it involves an online survey, and covers topics like your current mental health, whether or not you access campus resources for mental health care, past experiences that may have been involved in the determination of your mental health experiences, and how your mental health relates to your academic outcomes during first year....
1) When you or one of your friends is looking for a part-time job, how many...
1) When you or one of your friends is looking for a part-time job, how many weeks does it typically take? After you find a job, how many weeks does it typically last? 2) From your estimates, calculate (in a rate per week) your rate of job finding f and your rate of job separation s. (Hint: If f is the rate of job finding, then the average spell of unemployment is 1/f.) 3) What is the natural rate of...
One of your older friends is a student advisor to seniors at the UW’s Foster School...
One of your older friends is a student advisor to seniors at the UW’s Foster School of Business. She has determined the probability a student registers for a quantitative course (i.e., fin, acct) equals 0.37. She has also determined the probability a student registers for a qualitative course (i.e., mgmt, mktg) equals 0.61, and the probability a student registers for a qualitative course, given that she has already registered for a quantitative course, equals 0.82.(SHOW WORK;Round to 4 decimal places)...
Two friends are having a race. The course that they are racing is 500 m long....
Two friends are having a race. The course that they are racing is 500 m long. Jurgen travels the first half (250 m) of the race at a constant speed of 4 m/s, then instantly increases his speed to 6 m/s and completes the second half of the race at this speed. Sven travels at 5 m/s for 475 m, then accelerates at a rate of 2 m/s2 , until he crosses the finish line. Who wins the race? What...
An IT student has approached you for explanations on system development methodologies and approaches, for his...
An IT student has approached you for explanations on system development methodologies and approaches, for his class assignment. (i). Discuss, in detail, the phases involved in the development of an information system for an organization, for him to understand. (ii). Draw an appropriate diagram to illustrate your answer in (i) above. (iii). Critically compare and contrast Rapid Application Development Approach and Information Engineering Approach to systems development in organizations.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT