Arcadia Sports Case Study

When opening a business there are many choices a person can take to protect assets and liabilities some advantages and disadvantages they are listed as followed:
• A Solo proprietorship this is the most basic type of business to establish, and least amount of paper work involved to set up. o Advantages the sole proprietorship has complete control and decision-making over the business. The sole proprietorship can take discretion of the sale or transfer of his/her own terms. No corporate tax payment. Minimal legal costs to from there are few formal business requirements o Disadvantages are Because of the basic type of business, it is hard to keep your personal and business accounts separate.
• A limited liability company (LLC) it combines the legal structure that provides the limited liability features of a
corporation with the tax efficiencies and operational flexibility of a partnership. Some advantages and disadvantages they are listed as followed: o Advantages personal assets are usually exempt if the business incurs debt or that person is sued. Less booking there is less registration paperwork and start-up cost are lower. o Disadvantages limited life when a member leaves an LLC, the business is dissolved and the remaining members must fulfill all reaming legal and business obligation when the business closes. Self-employment Taxes because the member of an LLC is self-employed they must pay taxes towards Medicare and Social Security (U.S. Small Business Administration, n.d.).
• Cooperative this is a business or organization owned and operated for the benefit of that business using their services. Some advantages and disadvantages they are listed as followed: o Advantages less taxation just like an LLC, cooperative are incorporated normally not being taxed on surplus earnings, only on the individual level not the cooperative level. Funding opportunities there are a variety of government-sponsored grant programs to help a person get started. o Disadvantages having the ability to obtain capital through investors, because this type suffer from slower cash flow, investor may see it as a slow return on investment.
• Corporation this is for a larger, and well established companies having multiple employees, also is an independent legal entity owned my shareholders. Some advantages and disadvantages they are listed as followed: o Advantages limited liability taking reasonability for the business debts and actions of the corporation, shareholder personal assets are protected. Corporate tax treatment, taxes is filled separately from the individuals and only pay taxes on the salaries, bonuses, and dividends. o Disadvantages Time and money this type of business are time consuming vestures to start up. Double Taxed some time the corporate get taxed twice, first, when the company makes a profit, and second when dividends are paid to shareholders.
• Partnership is evolving two are more people sharing ownership, with each partner contributing to all parts of the business. There are three types of partnerships which are as followed: o General partnership this type all the profit, loss, and labilities are divided equally among the partners. o Limited partnership or also known as a limited liability partnership this type has limited liability also limited input with management decisions. Furthermore, the limit is depending on the amount the partners invest in the company. o Joint Ventures acts as a general partnership, this is for a limited time or for a single project. o Advantages general y inexpensive and easy to form business structure, most of the time is setting up the partnership agreement. A good partnership should be able to reap the befits of the other’s partner skill set. o Disadvantages joint and individual liability all parties retain full, shared labilities amount the owners. Not only are the reasonability for their own action, but the other partners, this includes business debts. Furthermore, the personal assets of all partners can be used to satisfy the partnership’s debt (U.S. Small Business Administration, n.d.).
• S Corporation is a special type of corporation created from an IRS tax election. This type of business can avoid double taxation once elected to be treated as an S corp. Some advantages and disadvantages they are listed as followed: o Advantages main benefit being that the corporation is not double tax, which would have the company money over the years. Business expense tax credit with some of the expenses that the corporation or employee incurs can be written off as a business expense. o Disadvantages becoming an S corporation, there are stricter operational processes, which requires the company to have a yearly director and shareholder meeting. Which minutes from those meetings be recorded.
As for Arcadia Sports, they should have filed under the limited liability company (LLC) by filing under this type of business Arcadia Sports would protect from personal liability for business decision or actions of the LLC.
Which would protect Jeb and Josh from any debt that Arcadia Sport incurs and their personal assets are exempt. Furthermore, limited means just that limited this might shield them from wrongful acts. I would assume that the company has insurance to cover the Jane medical expense that is going to accrue for her injures. This also falls under how this company and their business are set up, did they have a wavier that everybody signed for any personal injuries that might accrue during their excursion. If not, Jeb and Josh filled under a partnership business using the Limited partnership type, both Jeb and Josh would share full liability for Jane’s injury regardless how much each invested in the business. Furthermore, the personal assets of all the partners can be used to satisfy the partnership’s debt. Based on the fact presented, Jeb’s assets and/or profits of Arcadia Sports are safe from seizure by creditors for his personal
debt(s).