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ACCG106 Lecture Notes - Lecture 2: Trust Law, Unlimited Company, Sole Proprietorship

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beigeseal382
14 Aug 2018
School
Macquarie University
Department
ACCG - Accounting and Financial Management
Course
ACCG106
Professor
All

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Document Summary

Has a separate legal identity from its shareholders and is taxed on its taxable income: owners = shareholders, independent legal entity, public companies. Up to the purchase price of their shares only: unlimited life. Owner bears full responsibility for business debts and legal actions: limited by the skills, time and investment of owner, restrictive structure due to non- legal status of the entity, limited life. Business will cease to exist if owner leaves, retires or dies: unlimited liability. For the partnership"s de(cid:271)ts and obligations by all partners: limited life. If one partner dies or withdraws from the business then the partnership must dissolve: mutual agency. Each partner is bound by the partnership contract: many partnership disputes arise from profit sharing and decision making issues, more time consuming and costly to set up, must comply with complex rules and regulations and other legal requirements.

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Related Questions

Proof read please

In deciding which entity to use for a new business, it is good to review the benefits and disadvantage of each one. A corporation According to e-text (page 1094) A corporation is liable to third person for the act of it is officers, employees, and agent to the same extent that a natural person is liable act of agents and employees. Because of the corporation is a separate legal person debt, the debts that owe are ordinarily the obligation of the corporation only. It is good to know the advantage and the person itself is not responsible of the corporation debts because nobody want debts that goes after their personal properties. I think that’s the reason business owner choose a form of corporation however, the double taxation of appreciated assets on sale or dissolution is a bad disadvantage but it can be a right choice for certain situation because nobody wants to hold liable for their business debts, or personal income or any other personal assets. An owner always wants taxable profit and retain growth to pay down their business debts, even though the corporations taxes are extremely higher than a LLC, but I still recommended a business to choose a corporation that better benefit for them. A LLC taxes are lower but owner is personally obligator to any debts. It is good to know that corporation can also deduct disability insurance for owner-employees which is a significant advantage, reduced gain for capital gain and audit potential for tax liability A corporation enjoys limited liability, while partner is personal liable for the business. Frost, T. S. (1984). In regard to taxes, a corporation can generate tax saving if the corporate tax rate is lower than the personal one and if earning is retained in the corporation. the worse part will be the shareholder because they can be held personally liable for corporate debt and the creditor can now go after the shareholder property and their bank account and other assets that satisfy their dues. Frost, T. S. (1984). Tax aspects of the form of doing business. Dun and Bradstreet, Inc.D & B Reports, 22(1), 58. Starkman, J. (2007). Advantages of a C corporation. The Tax Adviser, 38(10), 617-618.

NEED 10 PAPER

You are the manager of Acme Fireworks. The company started in the owner�s garage two years ago and now has 15 employees that you manage. The company started as a sole proprietor, and the owner has never changed the entity. The company makes and sells fireworks. The owner has informed you that the company has received inquiries from several large retailers about the company�s ability to fill large orders on a regular basis. The owner told the retailers that the company could fill such orders, and a price per unit was agreed upon. No other details were discussed. The owner is anticipating that new employees will need to be hired but is worried that if the large orders do not continue, the company will not have the funds to pay the new employees. The owner is now considering changing the business entity but does not know what entity to form or how to form it.

The owner has asked you to do the following:

  • Explain potential personal liability for injuries to consumers caused by the product.
  • Analyze whether the owner formed a contract with the retailers applying the five elements as discussed from Week Two to the hypothetical facts.
  • Analyze how different employment types could be used with application of hypothetical facts.
  • Recommend a new business entity. Provide a rationale to support your recommendation

For each task, be sure to analyze the relevant law, apply the facts to the law, and make a conclusion. OUTLINE BELOW

  1. Introduction
  1. Provide a brief overview of the content contained within the proposal.
  2. Thesis: Transition from the current sole proprietorship to a Limited Liability Company (LLC) is the most seamless and logical progression based on the projected business model.
  1. Assessed Product Risk and Personal Liability
  1. Discuss the inherent risks associated with firework manufacturing and shipping.
  2. Note the variations/correlations in personal and business liabilities due to perceived negligence resulting in consumer/employee injury.
  3. Potential liabilities resulting from defective merchandise.
  4. Contract Viability
  5. Review the five elements of a contract from the information provided.
    1. Offer
    2. Acceptance
    3. Consideration
    4. Legality
    5. Capacity
  6. Provide recommendation of contract viability/probability
  1. Recruiting and Compensation
  1. Employment Types
    1. Full-time
    2. Part-time
    3. Casual
    4. Daily/weekly hire
    5. Probationary
  2. Determine the best option to increase productivity while minimizing prolonged or unexpected expenses
  3. Business Entity
  4. Discuss the different business entities available
    1. Sole Proprietor
    2. Partnership
    3. Corporation
    4. Limited Liability Company
  5. Compare and contrast benefits of an LLC v. other archetypes
  6. Conclusion
  7. Review all previously discussed information and develop a coherent vision
  8. Discuss aforementioned vision as it relates to thesis statement
  9. CHAPTER 5: Understanding and Choosing a Legal Structure. (2012). Women's Small Business Start-Up Kit (9781413317220), 149-186.

  10. Pakroo, P. H. (2014). CHAPTER 1: Choosing a Legal Structure. Small Business Start-Up Kit, 7-28.

* Words banks for the above Q15 through Q21:Absorbed, Actual, Budgeted, Common cost, Controllable cost, Cost,Full, Market price, Negotiated transfer price, Profit, Standards,Transfer price, Variable, & Variance.

15.) When the amount assigned to a responsibility center issignificantly influenced by the actions of someone within theresponsibility center, the item of cost is a_____________________.

16. In a _____________ cost system,every unit of product moving along the production line bears thesame amount of overhead cost, regardless of how much time itactually takes to process a particular unit.

17. In _______________ costing, nofixed overhead costs are charged to individual units of product, sono overhead rate for the fixed component of overhead costs need beused in the cost accounting system.

18. A cost that is incurred to supporta number of costing objects but cannot be traced to themindividually is a ___________________.

19. _______________is often regardedas the best approach to the transfer pricing problem, particularlyif transfer price negotiations routinely become bogged down.

20. A _______________ is simply thedifference between a predetermined norm or standard and the____________ results. Management wants to know not only what theamounts of the differences were but also, and more important, whythese occurred to take corrective action.

21. A _______________ center is anybusiness segment whose manger has control over both cost andrevenue. However, it generally does not have control overinvestment funds.

* Words banks for theabove Q15 through Q21: Absorbed, Actual, Budgeted, Common cost,Controllable cost, Cost, Full, Market price, Negotiated transferprice, Profit, Standards, Transfer price, Variable, &Variance.