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Pros and Cos of Different Business Entities

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I am trying to understand the pros and cons of choosing a different type of entity (Limited liability, Corporation Partnership, franchises or sole proprietorship) which best suits each situation below...justifying why you have chosen the specific type of entity to do business in a particular form, or, in the case of an existing business, to change to a different business form.
1.
Joe operates a local gardening and tree trimming business. Joe also does some light landscaping work for a few of his commercial accounts. Joe is very successful and has enough clients to keep him busy, along with at least three workers, working six days a week. Occasionally, a client rents a piece of equipment from Joe's business. Clients sometime take their time paying for Joe's services and, therefore, Joe is sometimes late paying his bills.
Joe's capital is only about $25,000, most of which consists of his new $20,000 truck and his assortment of lawnmowers, chainsaws, edgers, and gardening equipment. Joe's wife handles the books, yet is not involved in actual business operations. Should Joe continue to operate his gardening and tree trimming business as a sole proprietorship?

2.
Maury and Sons is an oilfield-drilling contractor. Maury has been dead for years and Monty and Max, two of Maury's grandsons, now operate the business. Monty and Max each own 25% of the business (they acquired their interests from their deceased fathers, Fred and Barney). Two aunts, Wilma and Betty, own the remaining 50%. Wilma and Betty, each in their early 80s, have no children.
The business was originally a sole proprietorship. Maury brought Fred and Barney into the business, yet there is no formal partnership agreement. Wilma and Betty have never been actively involved in the business, yet were given their interests after Maury's wife Mable passed away.
Monty and Max want to continue to expand the business and, eventually, sell the business to a "consolidator" (a company that buys local businesses, usually in exchange for a combination of stock, cash, and debt). Should Maury & Sons continue as a general partnership?

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Solution Preview

Bear in mind, a corporation is the safest and most concrete form of business. Despite the well known Stock market, an over whelming majority of corporations are not publicly owned (stock based).

Corporations are only liable for the assets of the corporation. This personal protection is called Indemnification. Should there ever be a problem where a consumer or distributor needs to collect monies from the business, a corporation can only be sued or taxed for the assets that it owns (monies, properties, etc.) The individuals that work on the board are not personally liable. Decisions made in a corporation are made by the board of directors. If the board isn't in agreement about an issue, it doesn't happen. The board must agree on actions in order for them to take place. Small fees exist each year to be a corporation (usually ...

Solution Summary

The posting addresses the pros (benefits) and cons (disadvantages) of the different types of business entities that exist. The three entities are: Limited Liability, Corporate Partnership and Sole Proprietorship.

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Among the roadside stores of a middle class suburb, there used to be two drugstores, approximately the same size. One was on the side of the main road where traffic was the busiest in the morning; the other was on the opposite side of the road. They were about 50 meters apart. After many years of competing, the two businesses were merged and the shop on the busy-morning side of the road was shut down. Why did the owners of these businesses decide to do this? Could this decision be explained by the concept of economies of scale?'

Among the roadside stores of a middle class suburb, there used to be two drugstores, approximately the same size. One was on the side of the main road where traffic was the busiest in the morning; the other was on the opposite side of the road. They were about 50 meters apart. After many years of competing, the two businesses were merged and the shop on the busy-morning side of the road was shut down. Why did the owners of these businesses decide to do this? Could this decision be explained by the concept of economies of scale?'

(a) A list of reasons (based on micro economic theory) why the owners decided to merge the businesses (or close one and retain the other). The reasons should centre around costs structures such as average, fixed, variable and total costs and other relevant factors

(b) Arguments for and against whether the merge decision could be explained by the concept of economies of scale.

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