Bill and Kerry plan to open a limo service for the Miami Dadearea after they buy and renovate two 15 passenger vans purchasedrecently at an auto auction in Delray Beach, Fl. Bill is a licensedcommercial driver, but is not knowledgable on business formations,and Kerry has experience as a bookkeeper. Kerry plans to keep hercurrent job with Sunshine foods, inc. but will moonlight with thecompany when necessary. Their initial projections are that theywill lose $35,000 in 2014. They have also paid cash for the twocommercial vans ($10,000 each) and had to pay $1,000 to the port ofMiami to receive a commercial permit valid through 7/31/2015. Tofund operations so far Bill has taken out a second mortgage on hispersonal residence for $70,000 and deposited the full amount intothe company's bank account. Kerry has not contributed any money tothe company, but has offered to work on the company's accountingbooks for 'free' until a point in time when the company has enoughmoney to pay her. a. List advantages for operating this business asa partnership instead of a corporation and state yourrecommendation as their CPA for business entity formation including% allocation if your advice is a partnership (please also statewhether you believe they should set up as a general or limitedpartnership in your opinion) b. As the CPA for Kerry and Bill, whatwill Bill and Kerry recognize for taxes, assuming they accept yourrecommendation for entity formation as stated in part A in2014?
Bill and Kerry plan to open a limo service for the Miami Dadearea after they buy and renovate two 15 passenger vans purchasedrecently at an auto auction in Delray Beach, Fl. Bill is a licensedcommercial driver, but is not knowledgable on business formations,and Kerry has experience as a bookkeeper. Kerry plans to keep hercurrent job with Sunshine foods, inc. but will moonlight with thecompany when necessary. Their initial projections are that theywill lose $35,000 in 2014. They have also paid cash for the twocommercial vans ($10,000 each) and had to pay $1,000 to the port ofMiami to receive a commercial permit valid through 7/31/2015. Tofund operations so far Bill has taken out a second mortgage on hispersonal residence for $70,000 and deposited the full amount intothe company's bank account. Kerry has not contributed any money tothe company, but has offered to work on the company's accountingbooks for 'free' until a point in time when the company has enoughmoney to pay her. a. List advantages for operating this business asa partnership instead of a corporation and state yourrecommendation as their CPA for business entity formation including% allocation if your advice is a partnership (please also statewhether you believe they should set up as a general or limitedpartnership in your opinion) b. As the CPA for Kerry and Bill, whatwill Bill and Kerry recognize for taxes, assuming they accept yourrecommendation for entity formation as stated in part A in2014?
