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.
ScholarMatic: Explanation & Answer
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