Choosing the Appropriate Business Ownership Structure

Case Study 2

Ralphael and Mitch have general commitments from several people to invest in their exotic animal park. Mitch wants to form a limited partnership, but realizes that every limited partnership must have at least one general partner who manages the business and is subject to unlimited liability for the business and its debts. Mitch thinks this is no problem because the general partner can be a “shell” corporation with Mitch and Ralphael at its helm. Ralphael thinks an LLC might be the best approach because the investors are relatives that have opinions on the business, and some are professionals who could offer valuable expertise. Compare the advantages and disadvantages of a limited partnership with an LLC and determine the most appropriate form of business for this venture.

Case Study 3

James, Annette, Vanessa and Andrea are undergraduate students studying business administration. James came up with an idea for a new product that he believes will make the four of them very rich. His idea is to manufacture cappuccino machines for the average business organization. The company would also supply a variety of specially blended coffee. James’s personal experience qualifies him to be a general manager of the new firm. Annette is a natural salesperson. Vanessa is an excellent cook and enjoys experimenting with different flavors in coffee. Andrea has little interest in sales or management, but she would like to invest a large sum of money that she inherited from her uncle. The group of students decided to name their business “JAVA.” Thoroughly discuss the factors that James, Annette, Vanessa and Andrea should consider in deciding which form of business organization to adopt.

 

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