Mcgee Cake Company

Running Header theme schooling 1 The McGee bar federation A Case Study Submitter teacher BUS Course 2012 depicted object STUDY 2 Introduction The McGee Cake Company, owned by Doc and Lyn McGee, has been a restore proprietorship fraternity since its inception in 2005 (Ross, Westerfield &038 Jordan, 2013, p. 18).A mend proprietorship is the least adjust chance vari open of brass instrument and has releaseed the McGees to run their high society largely as they see check out and to draw in all the financial profits. However, the companys late suppuration has added additional financial burdens which obligate ca engaged the McGees to revisit the companys current wee-wee of organization (Ross, Westerfield, &038 Jordan, 2013, p. 5). To that end, the owners stir approached me to help manage and coach the company since its fast produce has conduct to cash in flow and capacity problems (Ross, Westerfield &038 Jordan, 2013, p. 8). What follows is in material bodyation on the advantages and disadvantages of ever-changing the companys organization from a resole proprietorship to an limit obligation company as comfortably as the advantages and disadvantages of changing the companys current form of employment organization to a club (Ross, Westerfield &038 Jordan, 2013, p. 18). In addition, the McGees live with asked me for my recommendation as to which form of commercial enterprise organization I study the company should nethertake and the reasons/rationale layabout my recommendation. baptismal font STUDY 3 Key slue The one key issue that has led the McGees to consider moving the company from a sole proprietorship to a circumscribed financial obligation company or that of a corporation is the companys recent quick result. This growth has presented both opportunities and challenges for the company as a whole.Specifically, sales take on exploded since The McGee Cake Company was recently featured in a leading specialty nourishment mag azine (Ross, Westerfield &038 Jordan, 2013, p. 18). While this growth has allowed the McGees to use the companys revenues as their sole source of income, it has extend their enquire for capital as they involve had to hire additional workers to meet the direct (Ross, Westerfield &038 Jordan, 2013, p. 18). Also, additional capital get out be aimed to purchase more(prenominal) assets in an effort to proceed up with the companys go along growth (Ross, Westerfield &038 Jordan, 2013, p. 8). to a lower place the current headache form these two change magnitude expenditures paysheet and assetsargon the sole financial credit line of the McGees which whitethorn cause some financial stress since their available equity is restrain to the amount of their individualized wealth (Ross, Westerfield, &038 Jordan, 2013, p. 5). This growth has also presented the McGees with the opportunity to enter into backup with a national supermarket chain that has proposed to typeset four of th e McGees cakes in all of the chains stores (Ross, Westerfield &038 Jordan, 2013, p. 18).In addition, the McGees have been approached by a national restaurant chain in regards to selling McGee cakes in its restaurants (Ross, Westerfield &038 Jordan, 2013, p. 18). Again, under sole proprietorship the company may miss out on these opportunities because of inadequate capital to expand the business assets (Ross, Westerfield &038 Jordan, 2013, p. 5). For example, if the McGees do not have the capital to purchase more ovens they may not be able to delay up with the increased demand from the supermarket/restaurant chains, potentially causing both business ventures to fail.In order for the company to capitalize on its current growth the McGees need to be informed of the advantages and disadvantages of other(a) forms of business organizations to determine which leave behind silk hat suit their needs for both the short- and long-term. CASE STUDY 4 Advantages and Disadvantages of Changing from a Sole Proprietorship to a modified Liability Company The goal of a check financial obligation company is to operate and be taxed identical a partnership but arrest circumscribed indebtedness for owners (Ross, Westerfield &038 Jordan, 2013, p. ). Thus the principal(prenominal) advantage gained by shifting from a sole proprietorship to a more formal organization whether it be a limited liability company or a corporation is liability protection (Cromwell, n. d. , n. p. ). Under sole proprietorship the McGees have innumerable liability for their business debts (Ross, Westerfield &038 Jordan, 2013, p. 5). This means that if their business owes creditors and the McGees be unable to pay with business assets the creditors can demand payment via the McGees ainised assets (Ross, Westerfield &038 Jordan, 2013, p. ). In contrast, under a limited liability company the McGees personalised assets would be protected from business liability (Cromwell, n. d. , n. p. ). Additionall y, the McGees essential rely on their own personal wealth in an effort to further equity whereas a limited liability company affords the business to bring a number of investors and partners on board in an effort to raise capital (Ross, Westerfield &038 Jordan, 2013, p. 5 Cromwell, n. d. , n. p. ).Hence, the limited liability company exit provide them with the capital they require to increase their business assets in order to keep up with the high demand for their products. In terms of taxes the McGees soon report their personal and business taxes as one. Under a limited liability company they go away no longer be able to yell their business income on their personal files separate tax returns would have to be filed for both their personal income and their business income (Cromwell, n. d. , n. p. ).Moreover, the McGees would have to file documentation with the state preliminary to their company being able to claim limited liability status. The taxes and state file issues, in my professional opinion, should not be viewed as detractors. The benefits the company will reap (e. g. , ability to raise capital) certainly preponderate the annual taxation preparation and filing with the state to establish the limited liability company. CASE STUDY 5 Advantages and Disadvantages of Changing from a Sole Proprietorship to a CorporationSome of the advantages of forming a corporation are, in contrast to sole proprietorship, owner-ship of a corporation can be quick transferred (Ross, Westerfield &038 Jordan, 2013, pp. 5-6). Also, like a limited liability company, a corporation has limited liability for the companys debts and stockholders can only lose what they have invested (Ross, Westerfield &038 Jordan, 2013, p. 6). In addition, unlike sole proprietorship, a corporation an unlimited business life (Ross, Westerfield &038 Jordan, 2013, p. ). For these reasons, a corporation is a superior form of business organization for raising capital (Ross, Westerfield &038 Jordan, 2013, p. 6). Along with the advantages of forming a corporation comes the master(prenominal) disadvantage taxation. Corporations must deal with mental image taxation meaning that profits are taxed at both the corporate level when earned and again at the personal level when they are paid out (Ross, Westerfield &038 Jordan, 2013, p. 6).While a corporation provides many advantages the tax disadvantage that comes with it currently outweighs those advantages. CASE STUDY 6RecommendationWith The McGee Cake Companys rapid growth it is in need of changing its form of business organization. In particular, the McGees need enhanced protection for their personal assets from business obligations and liabilities as well as a better vehicle to attract investors (Cromwell, n. . , n. d. ). Therefore, later on carefully weighing the advantages and disadvantages of changing from a sole proprietorship to a limited liability company or that of a corporation my recommendation is for the former. Becom ing a limited liability company will benefit them greatly since it provides limited liability in that their personal assets will be separate from their business assets, thus defend their personal assets from creditors seeking payment if such a situation should ever arise.Becoming a limited liability company will also allow the McGees to raise equity through partners and investors. Since the McGees are in need of additional capital to purchase parvenu business assets in an effort for them to keep up with the current demand for their products a limited liability company would allow them this advantage. Since this rapid growth may unfold the McGees may want to revisit proper a corporation. However, my recommendation is for them to take the succeeding(a) logical and less daunting measuring stick and become a limited liability company for the reasons stated above.CASE STUDY 7 References Cromwell, J. (n. d. ). Demand Media The Advantages and Disadvantages of Changing the Company government from a Sole Proprietorship. Retrieved from http//smallbusiness. chron. com/advantages-disadvantages-changing-company-organization-sole-proprietorship-24632. html Ross, S. , Westerfield, R. , &038 Jordan, B. (2013). rudiments of Corporate Finance (10th ed. ). McGraw-Hill/Irwin New York, NY