ADMS 2610 Lecture Notes - Lecture 7: Legal Personality, Sole Proprietorship, Alimony

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cyanrat804

17 Nov 2016

School

York University

Department

Administrative Studies

Course

ADMS 2610

Professor

Jill Prindiville

For unlimited access to Class Notes, a Class+ subscription is required.

Document Summary

Easy to get started ,requires little cash ,permits a high degree of flexibility. Owner has total control and takes all profits. There is no legal entity between the person and the business, which can lead to huge tax advantages. you can deduct business expenses from other sources of revenues. If you run the business from home, you can deduct a portion(generally 10%) of your home expenses such as telephone, hydro(relating to water), mortgage and insurance from taxes. And it is frequently difficult to raise capital without putting your house up(put up= offer sth) for collateral(sth pledged as security for repayment of a loan). You can protect the ho(cid:373)e (cid:271)(cid:455) pla(cid:272)i(cid:374)g it i(cid:374) (cid:455)our part(cid:374)er"s (cid:374)a(cid:373)e a(cid:374)d (cid:271)u(cid:455) i(cid:374)sura(cid:374)(cid:272)e to (cid:272)o(cid:448)er (cid:373)ost eventualities(a tax deductible expense) Business could end upon death of proprietor(the owner of a business). P325 factors relevant to choosing the corporate form.

Related Questions

NEED 10 PAPER

You are the manager of Acme Fireworks. The company started in the ownerï¿½s 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 companyï¿½s 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

Introduction

Provide a brief overview of the content contained within the proposal.
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.

Assessed Product Risk and Personal Liability

Discuss the inherent risks associated with firework manufacturing and shipping.
Note the variations/correlations in personal and business liabilities due to perceived negligence resulting in consumer/employee injury.
Potential liabilities resulting from defective merchandise.
Contract Viability
Review the five elements of a contract from the information provided.
1. Offer
2. Acceptance
3. Consideration
4. Legality
5. Capacity
Provide recommendation of contract viability/probability

Recruiting and Compensation

Employment Types
1. Full-time
2. Part-time
3. Casual
4. Daily/weekly hire
5. Probationary
Determine the best option to increase productivity while minimizing prolonged or unexpected expenses
Business Entity
Discuss the different business entities available
1. Sole Proprietor
2. Partnership
3. Corporation
4. Limited Liability Company
Compare and contrast benefits of an LLC v. other archetypes
Conclusion
Review all previously discussed information and develop a coherent vision
Discuss aforementioned vision as it relates to thesis statement
CHAPTER 5: Understanding and Choosing a Legal Structure. (2012). Women's Small Business Start-Up Kit (9781413317220), 149-186.
Pakroo, P. H. (2014). CHAPTER 1: Choosing a Legal Structure. Small Business Start-Up Kit, 7-28.

greycrocodile249

Setup a new company in QuickBooks using the followinginformation.

OnJanuary 1, 2021, you establish a law firm. Youâve been offered twocontracts on retainer for two local businesses. With the twocontracts and walk-in clients, you think you can make your lawpractice a success. At the current time, you do not plan to hireany employees. Instead, you plan to perform the services yourself,at least initially until cash flow from the business can fundemployee payroll.


CompanyName	[your name]Comp Exam 1
Federal Tax ID	123-45-6789
Address	12 Elm Street
City	Woodbury
State	NJ
Zip	08096
Phone	856-222-3333
Industry	Legal Services
Income Tax Form	Sole Proprietor (FORM1040)
Fiscal year starts	January 1, 2021
Checking Account	[your name] Comp Exam 1Checking

Then, after you have set up yourcompany, you need to add three sets of information.

First, you need to add the people you do business with. You willadd the following 2 customers and 3 vendors using the followinginformation.


CustomerName/ Company Name	AirlineTransport
Address	40 George Blvd Cherry Hill, NJ 08033
Contact	Mary
Telephone	609-833-2904
Terms	Net 30


CustomerName/ Company Name	CADExpress
Address	1234 Middle Ct Haddonfield, NJ 08033
Contact	Lori
Telephone	856-556-7766
Terms	Net 30


VendorName/ Company Name	AAEquipment Leasing
Address	72 Long Lane Vineland, NJ 08445
Telephone	609-555-1234
Terms	Net 30


VendorName/ Company Name	Able OfficeSupplies
Address	900 Truman Blvd Marmora, NJ 08229
Telephone	609-376-1356
Terms	Net 30


VendorName/ Company Name	BayAdvertising Agency
Address	55 Inlet Street Ocean City, NJ 08226
Telephone	609-376-5555
Terms	Net 30

Then, you will add this informationto the Services you sell.


LegalConsultation (hourly)	$120 per hour	Account: 45400
Monthly Retainer	$1000 per month	Account: 45400

Then, you will add banking information as follows: Youâll need toadd a Business Checking Account (current asset account, #10100).Use the numbers â123456789â as both bank account numbers androuting numbers. Your account will be named â[your name] Comp Exam1 Checkingâ, dated 1/1/2021, with a $0 balance.

Part II

Record the following transactionsin QuickBooks for the new company.

Date	Transaction
01/01/2021	You invested $1,500cash in the business (Check No. 1000).
01/01/2021	Leased officefurniture for the business. Received the bill and paid one monthâsrental ($110 check) to AA Equipment Leasing.
01/01/2021	Billed monthlyretainer fees to both clients: Airline Transport and CADExpress.
01/02/2021	Purchased $150of office supplies on account from Able Office Supplies.
01/10/2021	Paid $540 fromyour business checking account to United States Post Office (USPO)postage expense for mailing brochures to potential clients.
01/12/2021	Provided 2 hoursof legal consultation to walk-in client. She paid cash at end ofmeeting today. Deposited into business checking account.
01/15/2021	Received billfrom Bay Advertising Agency for $200 of advertising expenses.
01/16/2021	Received paymentfrom Airline Transport for monthly retainer fee as billed on01/01/2021. Deposited check # 444 into your business checkingaccount.
01/20/2021	Received paymentfrom CAD Express for monthly retainer fee as billed on 01/01/2021.Deposited check #888 into business checking account.
01/25/2021	Paid $150 forthe office supplies purchased from Able Office Supplies on01/02/2021.
01/28/2021	Provided onehour of legal consultation today to walk-in client. Client paidcash and deposited funds.

Part III

Generate the following reportsusing QuickBooks. Convert them to Excel.

a. Journal from January 1, 2021 toJanuary 31, 2021.

b. Trial Balance at January 31,2021.

c. Profit and Loss, standard, fromJanuary 1, 2021 to January 31, 2021.

d. Balance Sheet, standard, atJanuary 31, 2021.

e. Statement of Cash Flows forJanuary 2021.

f. Customer Balance Detail

g. Vendor Balance Detail

aquamarineferret872

Investment and financing decisions, which may beshort-term or long-term decisions are best describedas:

financial decision making.

economic decision making.

accounting decision making.

Mutual funds, pension funds, investment dealers andinsurance companies are best described as examples of:

corporate finance.

market intermediaries.

financial intermediaries.

Farmers and Merchants Bank lends money to Ruth topurchase a car from Steven Toyota. Ruth is going to insure the carwith Allstate Insurance. Which party is best described as thecreditor?

Ruth

Steven Toyota

Allstate Insurance

Farmers and Merchants Bank

Which of the following would not be described as adebenture?

An unsecured loan

A loan secured by collateral

A loan secured by the âfull faith and creditâ of theissuer

Morgan Stanley was the investment banking firm that tookFacebook from being a closely held company to issuing stock to thepublic for the first time. Which of the following terms mostclosely describes this?

money market security.

issuing commercial paper.

initial public offering (IPO).

debt security backed by the general credit of theissuer.

Which of the following transactions does not take placein the primary market? An investor:

buying a newly issued municipal bond.

buying shares of an initial publicoffering.

selling one hundred shares of stock through a stockbroker.

buying a U.S. Treasury bill through the governmentauction.

The majority of home purchases in the U.S. are securedwith a mortgage. A mortgage is:

an unsecured loan.

an equity investment in the property.

a debt obligation secured by a specificproperty.

Which form of business would most likely describe thefollowing, a college student other students, a retired woman whobabysits children, a teenager who mows lawns, and a partyclown?

Partnership

Corporation

Sole proprietorship

Limited liability company

Flow-through taxation is a characteristic for all butthe following forms of business?

Partnership

Corporation

Sole proprietorship

Limited liability company

Your sister wants to start a tee shirt business on e-Baywith you to help pay for college tuition. All of the following areadvantages to partnerships that you should both consider, except____________?

Easy to form

Access to capital

Business income is taxed once, at the individualpartnerâs level

Which of the following takes into account takes intoaccount the opportunity cost of funds?

Net profit

Economic profit

Accounting profit

When we talk about capital structure, this refersto:

the cash, inventory, and accountsreceivable.

mix of debt and equity to finance anenterprise.

the investment in plant, property andequipment.

The uncertainty associated with the use of debt tofinance a business enterprise is best described as:

financial risk.

business risk.

operating risk.

The mix of debt and equity that is used to finance abusiness enterprise is best described as theenterpriseâs:

assets.

working capital.

capital structure.

capital expenditures

Generally accepted accounting principles (GAAP) are bestdescribed as a(n):

organization that establishes the accounting principlesfor U.S. financial reporting.

accounting standards promulgated by the InternationalAccounting Standards Board (IASB.)

set of basic principles and conventions that are appliedin the preparation of financial statements.

organization that establishes the accounting principlesfor business entities in the European EconomicCommunity.

Which reporting convention requires recording revenueand expenses when the transaction occurs, regardless of when cashchanges hands?

Cost basis

Cash basis

Accrual basis

The summary of the companyâs performance over a periodof time, typically a fiscal quarter or fiscal year

Balance sheet

Statement of stockholderâs equity

Income statement

Statement of cash flows

_______ is the cash flow from the day-to-day operationsof the business; the result of subtracting the increase in newworking capital from traditional cash flow.

Cash flow from investing

Cash flow from financing

Simple cash flow

Cash flow from operations

The debt ratio is classified as which type ofratio?

Owner

Liquidity

Efficiency

Productivity

Financial Leverage

Inventory turnover, accountsreceivable turnover, fixed asset turnover, and total asset turnoverare all classified as which type of ratio?

Owner

Liquidity

Efficiency

Productivity

Financial Leverage

ABC Company attempts tomanage its earnings by extending the useful life of all of itsequipment. Which of the following will not be an outcome of thischoice by management?

Income will be higher than it would have been underprior accounting methods.

Equipment values will be higher than they would havebeen without the change.

Depreciation expense will be lower than it would havebeen under prior accounting methods.

Depreciation expense will be higher than it would havebeen under prior accounting methods.

It is important for a companyto know the level of sales at which it covers all its variable andfixed operating costs. This level of sales is best described asthe:

gross profit margin.

contribution margin.

operating break even.

operating profit margin.

The minimum return thatinvestors expect to earn on the investment in stock is bestdescribed as:

growth rate.

risk premium.

capital gains yield.

required rate of return

If a company returns more than the required rate ofreturn on a stock, what happens to the value of thatstock?

The stock price falls.

The stock price rises.

The stock price stays the same.

When market rates are greaterthan the dividend rate, preferred shares will tradeat:

par.

a discount.

a premium.

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ADMS 2610 Lecture Notes - Lecture 7: Legal Personality, Sole Proprietorship, Alimony

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