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Corporations and Partnerships Week 3 Read and respond to ATC 8 6 on page 319 In your post describe the advantages and disadvantages of organization forms Include why most large public health care organizations use the corporate form You must respond to at least two of your classmates postings to receive full credit Jim Baku and Scott Hanson are thinking about opening a new restaurant Baku has extensive marketing experience but does not know that much about food preparation However Hanson is an excellent chef Both will work in the business but Baku will provide most of the funds necessary to start the business At this time they cannot decide whether to operate the business as a partnership or a corporation To Mr Jim Baku Mr Scott Hanson From Stephani Dayton Date May 16 2013 Re Partnership or Corporation Message I am very intrigued by your new found partnership and I want you to know that with any business it takes hard work and dedication and through all that your business will become a success When stating a new business there are many things that need to be taken into deliberation and that is thinking of all the advantages and disadvantages to running a restaurant I would also recommend a Corporation over a Partnership As a group you will need to establish a corporate agreement which means being a separate legal entity created by the authority of a state government Edmonds 2010 pg 306 however a partnership agreement involves Defining the responsibilities of each partner and figuring out how income and losses will be divided Edmonds 2010 pg 306 When assembling organizational forms a Partnership allows a person to share their talents capital and the risks and rewards of their business ownership First I would like to discuss the advantages of having a partnership allows for someone to share the business with and everything that comes along with it Corporations make for an easy transfer of ownership where a partnership corporations have a layered management structure and have the ability to raise capital and with a partnership it is mostly limited by creditors and there is also the stability of a corporation s life where with a partnerships they result in complete termination upon the death of a partner The partners have unlimited liability They are personally liable for the business actions Transfer of ownership is difficult in partnership A partnership may need to get consent of other partners if he wants to sale his stake The capacity to raise capital is separate legal entity So liability of shareholders is limited to the amount that the shareholder has invested in the corporation Plaintiffs sue the corporation departed and limited liability meaning that a creditor cannot take away the corporate owner s assets and in a partnership they are able to Some of the disadvantages of a corporation are the regulations set by the corporation there is also double taxation Corporations pay their income taxes on supplies received from corporations and the taxes are taxable to the owner and not the company that has a partnership Going with a corporate over a partnership investment looks to be the better choice for your restaurant business in the long term sense By doing this everything would be dived into percentages like responsibilities profits and risk In this type of business there are many advantages like the ability of the partners to make decisions for their company on their own Everything in a partnership is private and the responsibility is solely up to the partners making less limitations and the cost to starting out will not be massive There is also some disadvantages like liability concerns budget issues and conflicts of individuals Every individual is responsible for their own actions in a partnership making both of them liable for any mistakes that they make The budget would be another disadvantage because having just the two owners could possibly make it hard to raise funds Sometimes having only two owners could cause personality changes and the two of you could disagree on a particular subject and where it is only the two of you there is no one to be impartial to confide in Going corporate over partnership would appear to be the best choice for your restaurant business in the long term outlook Where it is in the health care sector I know that most of the organizations use the corporate form because they make enough money to be able to operate this big of an organization This is a huge advantage to them financially and showing to be achievable in with their huge numbers of owners with capital Health care organizations that use the corporate form prevent unexpected financial issues which could be present if they had went with a partnership form Stephani Dayton References Edmonds T Survey of Accounting 2nd Edition 2nd ed McGraw Hill Primis Custom Publishing Retrieved from http online vitalsource com books 0390124117 page 305

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UOPX ACC 281 - Corporations and Partnerships - Week 3

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