Question

Imagine you and a friend are in college. You decide you want to open a coffee shop on campus next to the university’s dining room. You make your appeal to the administration by expressing how having a coffee shop on university grounds will help fellow students save time and money since they will not have to go off campus to purchase their favorite hot beverages and baked goods. The administration is open to the idea and praises your entrepreneurial spirit. They ask you to research the business ownership structure that would be most appropriate by comparing and contrasting the structures, and report back to them in two weeks.

Follow these steps to complete this activity. You will create a chart, a Venn diagram, and a report based on the directions below.

Step 1: Compare and Contrast Chart
Create a compare and contrast chart of the following business structures:
sole proprietorship
partnership
limited liability corporation
Include at least three advantages and disadvantages of each structure, including the legal implications of each ownership structure.
Step 2: Create a Venn diagram
Create a Venn diagram transferring the details from the chart.
Identify those characteristics that are similar in the cross-section.
Place contrasting characteristics in the outer rings.
Step 3: Compile a Report
Determine which structure would be most appropriate for the coffee shop.
Compile a report identifying the structure you chose.
Provide three reasons explaining your choice.

Answer 1

Step 1: Compare and Contrast Chart

| Business Structure | Advantages | Disadvantages | Legal Implications |
| ------------------------ | -------------------- | --------------------| ------------------- |
| Sole Proprietorship | Easy to set up | Unlimited liability | Personal liability |
| | Complete control | Limited resources | No separate entity |
| | Simple taxation | Difficulty raising capital | |
| Partnership | Shared responsibility | Unlimited liability | Shared liability |
| | More resources | Potential for conflicts | No separate entity |
| | Simple taxation | Difficulty raising capital | |
| Limited Liability Company | Limited liability | Higher formation costs | Separate legal entity |
| (LLC) | Flexible management | Formalities required | Pass-through taxation |
| | Ability to raise capital | Potential for disputes | |

Step 2: Create a Venn diagram

See attached image for the Venn diagram.

Step 3: Compile a Report

After considering the advantages and disadvantages of each business structure, we have determined that a Limited Liability Company (LLC) would be the most appropriate ownership structure for our coffee shop.

Firstly, an LLC provides limited liability to its owners, which means that their personal assets are protected in case the business faces any legal issues or debts. This is important for us as we are just starting out and cannot afford to put our personal assets at risk.

Secondly, an LLC provides flexibility in management and ownership. The members of an LLC can choose to manage the business themselves or hire a manager to do so. Additionally, they can choose to have equal or unequal ownership shares in the business. This flexibility will allow us to make decisions and run the business in a way that suits our needs and goals.

Lastly, an LLC provides pass-through taxation, which means that the profits and losses of the business are reported on the personal tax returns of the owners. This avoids double taxation that can occur in other business structures, such as corporations. It also simplifies the tax filing process for us as owners.

In conclusion, the LLC structure provides the protection, flexibility, and simplicity that we need for our coffee shop. It allows us to focus on building and growing our business without worrying about the legal and financial risks associated with other structures.