Exam 4: Selecting a Form of Business Ownership

SCENARIO-BASED Pat Smith and George Johnson own five flower shops in Manhattan. They want to open a wholesale flower business to supply their shops as well as others in their geographical area. They currently operate as a partnership but are considering changing their legal form of organization. One reason for doing this is to increase the likelihood that they will be able to raise the funds needed to expand. -The partners should consider converting to a corporation.

What advantage(s) does the S-corporation give to the small business owner that the regular corporation does not give to the small business owner

When the owner of a sole proprietorship dies, the business by law is allowed to continue to perpetuity.

Discuss the motivations behind mergers, acquisitions, and takeovers.

The vast majority of not-for-profit corporations are neither rich nor famous, but nevertheless make significant contributions to society.

"How much control do you want" is not a major consideration when starting a new business.

SCENARIO-BASED Rock City is a community in the Midwest with a population of 23,000 people. Three dental clinics serve the city and the surrounding area. Perfect Smile is owned and operated by the newest dentist in town, Dr. Martin Harris, who employs one dental assistant and a secretary/receptionist. Drs. Joan Bennett and Joseph Young jointly operate Teeth for Life and provide a few more services than Dr. Harris. Rock City Dental Clinic has been in business for 58 years, employs 38 people, and offers a range of services that include dentures, orthodontics, and minor oral surgery. -Teeth for Life would be better suited for a _____ than a sole proprietorship.

In a limited partnership, a single _____ runs the business and is responsible for all of the business liabilities.

Corporations are owned by shareholders who invest money in the business by buying shares of stock.

SCENARIO-BASED Scuffy the Tugboat is a family-run business that makes tugboats. It is owned by three brothers, Jack, Frank, and Bob. Their first tugboat is still towing ships in Boston Harbor, and over the years, success has allowed them to grow the company by plowing money back into it. Now, however, they want to expand but they are not sure how they should do this. They are also unsure about which legal form of organization is best for them. -The brothers are considering joining a cooperative of tugboat operators. This would allow them to join with other tugboat operators to market their services and purchase supplies such as gasoline. If the cooperative is successful, they would share in the cooperative's financial success.

If they form a corporation and Pat Smith gets into an accident with the company's van and the van is not insured, George Johnson could be held personally liable for any damages resulting from the accident.

SCENARIO-BASED Rock City is a community in the Midwest with a population of 23,000 people. Three dental clinics serve the city and the surrounding area. Perfect Smile is owned and operated by the newest dentist in town, Dr. Martin Harris, who employs one dental assistant and a secretary/receptionist. Drs. Joan Bennett and Joseph Young jointly operate Teeth for Life and provide a few more services than Dr. Harris. Rock City Dental Clinic has been in business for 58 years, employs 38 people, and offers a range of services that include dentures, orthodontics, and minor oral surgery. -Given the size of his operation and the fact that he's just opened his office, Dr. Harris is probably organized as a _____.

Some business owners prefer to operate as a limited liability company (LLC) rather than an S-corporation for the following reason:

How does a limited partnership overcome the unlimited liability defect of a general partnership

SCENARIO-BASED Scuffy the Tugboat is a family-run business that makes tugboats. It is owned by three brothers, Jack, Frank, and Bob. Their first tugboat is still towing ships in Boston Harbor, and over the years, success has allowed them to grow the company by plowing money back into it. Now, however, they want to expand but they are not sure how they should do this. They are also unsure about which legal form of organization is best for them. -Perhaps the best legal form of organization for Scuffy the Tugboat is a limited liability company (LLC). This would give the three brothers limited liability and would mean they would not pay personal taxes on their company's earnings.

The most important benefit of incorporation is the continuity to which shareholders are exposed.

SCENARIO-BASED Scuffy the Tugboat is a family-run business that makes tugboats. It is owned by three brothers, Jack, Frank, and Bob. Their first tugboat is still towing ships in Boston Harbor, and over the years, success has allowed them to grow the company by plowing money back into it. Now, however, they want to expand but they are not sure how they should do this. They are also unsure about which legal form of organization is best for them. -To maximize the likelihood of obtaining financing from the bank to expand, the three brothers should form a partnership.

SCENARIO-BASED Rock City is a community in the Midwest with a population of 23,000 people. Three dental clinics serve the city and the surrounding area. Perfect Smile is owned and operated by the newest dentist in town, Dr. Martin Harris, who employs one dental assistant and a secretary/receptionist. Drs. Joan Bennett and Joseph Young jointly operate Teeth for Life and provide a few more services than Dr. Harris. Rock City Dental Clinic has been in business for 58 years, employs 38 people, and offers a range of services that include dentures, orthodontics, and minor oral surgery. -In deciding which legal form of business ownership to choose, these professionals must ask themselves all of the following questions except _____.

SCENARIO-BASED Scuffy the Tugboat is a family-run business that makes tugboats. It is owned by three brothers, Jack, Frank, and Bob. Their first tugboat is still towing ships in Boston Harbor, and over the years, success has allowed them to grow the company by plowing money back into it. Now, however, they want to expand but they are not sure how they should do this. They are also unsure about which legal form of organization is best for them. -If Scuffy the Tugboat operates as a partnership each of its owners would have limited liability.

Cooperatives can increase profits for its producer-members and lower costs for its consumer-members.