Question

Determine the best form of ownership for each case below.

Explain your reasoning: state the reasons for picking the form of ownership and also why each of the other choices were NOT chosen.

Case 1

Bill Derr is 40 years old and has had a very successful career as an architect for a big firm. His wife is being transferred to a new city, and rather than look for a new job he has decided to start his own business. Consider the following information and recommend the best type of business ownership for Bill.
1) Bill has enough money to start his business.
2) Bill has a wife and three children. They live comfortably and he is afraid of risking their home and lifestyle should his business not do well.
3) Bill would like to leave a legacy for his children. He would like them to be able to inherit his business.
4) Bill does not want to make the affairs of his business public. He does not want to have to publish his financial information.

Case 2

Stu Dhent is a third year college business student in a city away from home. Each year, Stu spends weeks looking for a place to rent. Affordable rental units are difficult to find and the search is quite time-consuming and frustrating. While looking, Stu found a house for sale close to the college. He checked the house and found that it could be easily converted into three two-bedroom apartments. Each apartment could have a kitchen, living room, two bedrooms, washroom and separate entrance.
Stu contacted three friends who also need a place. After speaking with their parents, the friends have decided to buy the house and convert it to rental units. Each of the friends will have one bedroom in the new apartments. The additional two-bedroom unit will be rented out. The housing unit will be a business that the friends will run. Consider the following information, and recommend the best type of business ownership for the group.
1) With their parents, the friends will be able to raise enough money to buy the house and complete the necessary renovations.
2) Not all of the friends will be able to contribute an equal amount to the purchase.
3) The friends have agreed that they will each participate in completing the renovations and maintaining the house when they own it, i.e., they will each be involved in yard work, painting, and other household maintenance tasks.
4) To avoid future arguments, the friends would like everyone to be entitled to one vote on any decisions that have to be made concerning the operation of the house and rental units. The majority vote will prevail.
5) Profits, if any, should be split according the amount of investment and the work done by each person.
6) The friends would like to limit their liability in the event of a future loss or lawsuit by a tenant.
7) The group would like to be able to add new investors if they choose to expand in the future.

Answer 1

Explanation:

➡️The four ways in which a business may be set up are: Sole Proprietorship, Partnership, Corporation, and Limited Liability Company or LLC. 1. Sole Proprietorship – This is the most simple business entity there is. As the name implies, the establishment has just one owner.