Reference no: EM133502344

Discussion Post: Business Law

Selecting a Business Entity

Business entities are an integral part of business practice and economic productivity. An effective business practitioner must understand the characteristics of the major types of business entities, as these attributes can dramatically affect the nature of the business's relationships. Choosing the right entity is an exciting and important step in the lifecycle of a business. The entity a business owner chooses helps outline roles and responsibilities among owners, guides in conducting the business, and provides exit options, among other things. Understanding business entity characteristics includes becoming familiar with the ownership structure, organizational structure, potential liability, compensation methods, and tax laws applicable to the business entity.

Your Assignment for this week is to analyze the three business scenarios below. Based on what you have learned in this week's reading and video lecture, advice the potential entrepreneurs on which business entity they should form. Be sure to discuss why you are making that recommendation, and include a discussion of both the advantages and disadvantages of the business entity you have recommended.

Business advice (Scenario I)

luke, austin, and r.j. have been close friends since high school, and even went to college together. All three graduated last year; luke with a degree in computer science, austin with a degree in graphic design, and r.j. with a degree in business administration. All three self-proclaimed "computer geeks" and have worked part-time through high school and college fixing computer problems. Each has approximately $50,000 in savings for this business venture. They have been talking about starting a computer company in their local town to help businesses and individuals with computer problems or those who need help developing and designing web sites. In doing research, justin found that there are only two other computer companies in their town of 100,000 people, and neither one will do both web design and computer hardware/software troubleshooting.

Question: What type of business organization should Luke, Austin, and R.J. adopt? Why?

Business Advice (Scenario II)

Tyler, a 27-year-old married man, just completed his fifth year as a journeyman carpenter with John Casey Homebuilders, a small homebuilder 25 miles from his hometown. Tyler has just received an inheritance of $100,000 from his favorite aunt. During the past five years, Tyler has been able to purchase many of the tools and equipment that he needs to be a good finish carpenter. He has not been satisfied working for John the past couple of years and has talked with his wife about starting his own business. Tyler's wife, Esther, agrees that in order to be happy, and fully supports him in opening his own business. Esther graduated from the local university with a degree in liberal arts but stays at home with the kids.

Question: What type of business organization should Tyler adopt? Why?

Business Advice (Scenario III)

Troy and Tristan have decided to open a competitive Cheer and Dance business. Troy's expertise is in business. He has a degree in Business Administration with a minor in Underwater Basket Weaving. Tristan, on the other hand, has a degree in Sports Management and has been coaching the Tesoro cheerleading team, while his girlfriend, Beatrix, has been coaching the dance team. The problem is that no one has much capital to invest. In fact, both are having a little trouble figuring out how they will be able to get the startup capital for the business. Fortunately, there are no other competitive Cheer and Dance companies in the area. Unfortunately, the potential buildings they have found to lease costs over $7,000 per month and they expect that utilities and water will cost approximately $650 per month. Liability insurance is expensive as well, estimated to be $2,000 per month due to possible injuries.

Question: What type of business organization should Troy and Tristan adopt? Why?