Assignment 2 Chapter 6: Business Formation
Complete Business Case Study (WATTS)
Writing Assignment 2: Chapter 6: Business Formation
Limited Partnerships
It might surprise you to know that limited partnerships can be formed by families as well as companies. Use the Internet to find out how to set up a family limited partnership. Who would be the general partners and who would be the limited partners—and why? What advantages would this type of arrangement have for the family? What has the IRS said about family limited partnerships? (33pts)
Franchise
Students should research the costs and benefits of becoming a franchisee for a specific franchise. (Basic information on costs and benefits is usually available at the franchise websites and also at websites such as Entrepreneur.com and The Franchise Mall (http://www.thefranchisemall.com). Students should also search the Internet for any recent articles and reports relevant to the franchise that might impact its future business prospects. Upon completion of their research, students should discuss the following questions: From the student’s perspective, what makes the franchise an attractive opportunity? Has the franchise been “in the news” for any reason (good or bad) recently? What is the franchise fee for the franchise? What other startup costs would a franchisee incur? What are the royalties and other ongoing fees franchisees must pay? Does the franchisor offer any help with financing? If so, what type? What types of training and support does the franchisor offer? (33pts)
The “Art” of Choosing the Right Form of Business
Many artists and art lovers embrace the idea of the “starving artist,” such as the early career artist who hasn’t yet sold much of her art or whose art hasn’t yet been “discovered,” the artist who sacrifices lifestyle, living in a cheap apartment in a poor neighborhood, scraping by with barely enough to eat, pouring every dollar at their disposal into his art, or the artist who makes do by working other jobs, such as a waiter or waitress, to pay the rent so he can work on his art in his free time.
2 As an artist and businessperson, however, you’d rather not be a “starving artist.” Of course, it takes time to master your art, display your work, and build a following, but is it necessary if you’re successful as an artist to also be a bad businessperson? The challenge with your art, bronze sculptures, however, is what comes first, the chicken or the egg, in other words, success as an artist or financial success? With the cost of materials, foundry time to pour and shape your creations, and the help of technicians or specialty artists, it can cost thousands of dollars, sometimes tens of thousands, per piece. But without financial success, you lack the capital needed to create your work. And, without your work to sell to art lovers, you don’t have the capital you need to create your work. Yes, indeed, chicken or egg? Since you’re a better artist than businessperson, you’re working with a lawyer and accountant who have advised you to establish a company and choose a business form that helps you succeed as an artist. They’ve given you some preliminary information on sole proprietorships, C corporations, S corporations, partnerships, and limited liability companies. You don’t know about any of that, but you know that you want to shield yourself from lawsuits, minimize taxes, have the ability to bring on different financial backers over time (in the art world, financial backers start by backing projects and then as their confidence grows in the artist, they eventually back the artist overall and not just specific projects), and give yourself as much flexibility as possible.
You Decide:
What business form would shield this artist from lawsuits and minimize taxes? Define the business form.
What business form would give the artist the greatest ability to bring on different financial backers over time? Define the business form.
What business form would give the artist the greatest amount of flexibility over time? Define the business form. (34pts)
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