Case study three jeb and josh are lifelong friends

This preview shows page 9 - 11 out of 14 pages.

Case Study Three Jeb and Josh are lifelong friends. Jeb is a wealthy wind-power tycoon, and Josh is an active outdoor enthusiast. They have decided to open a sporting goods store, Arcadia Sports,
Image of page 9

Subscribe to view the full document.

Final Project 10 using Jeb’s considerable financial resources and Josh’s extensive knowledge of all things outdoors. In addition to selling sporting goods, the store will provide whitewater rafting, rock- climbing, and camping excursions. Jeb will not participate in the day-to-day operations of the store or in the excursions. Both Jeb and Josh have agreed to split the profits down the middle. On the first whitewater rafting excursion, a customer named Jane falls off the raft and suffers a severe concussion and permanent damage to her spine. Meanwhile, Jeb’s wind farms are shut down by government regulators, and he goes bankrupt, leaving extensive personal creditors looking to collect. The main types of business entities are sole proprietorships, general partnerships, corporations, limited liability companies, and limited liability partnerships. Each of these business entities have different advantages and disadvantages. A Sole Proprietorship is a business owned by one person. It is not a separate legal entity; and most states do not require formal filings to form one. The advantages of a sole proprietorship are that they’re easy to start, and much cheaper to start. They have pass- through taxation, where the business is not taxed, and instead all the profits go to the owner, and they are taxed as normal. The disadvantages are that owner is personally liable for any debts of the company and can be personally sued. There are also less ways to raise capital, so all money put into the business would be personal funds or loans. A general partnership is very similar to a sole proprietorship but involves more than one owner. Creation of a general partnership is also easy, and all income is personal income. Business losses can also be deducted from one’s taxable income. However, each partner is personally liable for the company’s debts, including debts incurred by their partner.
Image of page 10
Final Project 11 There are several other types of partnerships as well. The limited partnership allows one person to be the general partner, while the other partner(s) are limited partners. Limited partners are not involved in the management of the company and are only liable for the amount they invested. There is also the limited liability partnership, where each partner is personally liable for only the amount they have invested in the company. However, in all of these partnerships (General, Limited, and Limited Liability), partners are liable for the malpractice of the other partners in the company to some degree. Corporations are treated like people and are considered a separate legal entity.
Image of page 11
You've reached the end of this preview.
  • Spring '17
  • Corporation, Types of business entity

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern