Question

Om and Rich each earn $70,000 a year as general partners in a successful landscaping business. This has been a good choice for them because they prefer to make their own decisions and they enjoy the sense of freedom that comes from working outdoors. Their business employs 25 people. Some of these employees drive company trucks and equipment trailers to job sites. Tom and Rich are considering incorporating. They have asked for your input.

A) Incorporate the business for legal protection and tax benefits.
B) Keep the business as a partnership for more control and flexibility.
C) Sell the business and retire early.
D) Hire more employees and expand the business.

Answer 1

Tom and Rich have two options: incorporate their landscaping business or keep it as a partnership. Incorporation offers legal protection and tax benefits, but may reduce control and flexibility. Keeping it a partnership allows for more control and flexibility, but lacks the same legal protection as a corporation.

Step-by-step explanation:

Tom and Rich are considering whether to incorporate their landscaping business or keep it as a partnership. There are pros and cons to each option.

If they choose to incorporate, they will have legal protection and potential tax benefits. Incorporation limits their personal liability if the business loses money or harms others. However, they may lose some control and flexibility compared to being a partnership.

On the other hand, if they choose to keep the business as a partnership, they will have more control and flexibility in decision-making. They will also continue to share the profits among themselves. However, they will not have the same legal protection as a corporation.

Ultimately, the decision depends on their priorities and risk tolerance. If legal protection and tax benefits are important to them, then incorporating would be a good choice. If they value control and flexibility more, then keeping it as a partnership may be preferable.