Lesson #1, Assignment #2 - Read the minicase 'The McGee...

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Read the minicase 'The McGee Cake Company' on page 18 of your text and address the following questions in a brief essay of 200-300 words: 1. What are the advantages and disadvantages of changing the company organization from a sole proprietorship to an LLC? The advantage and disadvantage of changing the company to LLC are: Advantage: 1. Tax Benefits LLCs offer pass-through tax status similar to that of a partnership (LLCs with just one member are taxed as a sole proprietorship). Pass-through status means that the income from the LLC is taxed at just one level---the personal level. Unless it elects to be treated as a C corporation, the LLC itself does not pay taxes. In contrast, C corporations pay tax on their company income, and company owners must pay tax on dividends and bonuses they take out. This "double taxation," as it is called, can be avoided through an LLC. 2: Less Paperwork Corporations are required to hold meetings and record minutes on those meetings each year; LLCs are not. The amount of paperwork needed to purchase assets, open bank accounts or make major changes within the company is also significantly reduced in an LLC. 3: Liability Protection
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This note was uploaded on 04/29/2011 for the course FINANCE BA521 taught by Professor Mark during the Spring '11 term at Antelope Valley College.

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Lesson #1, Assignment #2 - Read the minicase 'The McGee...

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