Question

Case Analysis
In early 2008, Dee and Lyn Reyes formed the Super Delicious Cake Company. The company produced a full line of cakes and its specialties included cheese cake. The couple formed the company as an outside interest and both continued to work at their current jobs. Dee did all the baking and Lyn handled the marketing and distribution. With good product quality and a sound marketing plan, the company grew rapidly. In early 2013, the company was featured in a widely distributed entrepreneurial magazine. Later that year, the company was featured in Best Desserts, a leading specialty food magazine. After the article appeared in Best Desserts, sales exploded and the company began receiving orders from all over the world.
Because of the increased sales, Dee left his other job, followed shortly by Lyn. The company hired additional workers to meet demand. Unfortunately, the fast growth experience by the company led to cash flow and capacity problems. The company is currently producing as many cakes as possible with the asset it owns, but demand for it cakes is still growing. Further, the company has been approached by a national supermarket chain with a proposal to put four of its cakes in all of the chain's stores, and a national restaurant chain has connected the company about selling Super Delicious cake without brand name.
Dee and Lyn have operated the company as a sole proprietorship. they have approached you to help manage and direct the company's growth. Specifically, they have asked you to answer the following questions:


1. What are the advantages and disadvantages of changing the company organization from sole proprietorship to a limited partnership?
2. What are the advantages and disadvantages of changing the company from a sole proprietorship to a corporation?
3. Ultimately, what action would you recommend the company should undertake? Why?

Answer 1

Answer:

Sole Proprietorship is a business owned by one person. It is the cheapest business to form and only a few government regulations must be satisfied for most industries. It pays no corporate income taxes and all the profits of the business are taxed as individual income.

Explanation:

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