The following 30,000 analysis on the entity in question is meant to determine whether it is viable. Based on the fact that the potential entity is a partnership, it is co-owned by the two. The restaurant’s location is friendly because it is in an area with high foot traffic. Therefore the marketing cost for such a business is not likely to be too high. Thus the tax rates can influence the viability of the business. The business is likely to make a $500,000 profit in the first year.
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Business Entity Selection: Can the entity be a sole proprietorship?
No. Based on the fact that the entity has two owners, it cannot be a sole proprietorship. This is because a sole proprietorship has to be owned by a single person. Can the entity be a corporation? Yes, it can. This is because a corporation had to have at least one shareholder. Therefore, the entity shall have two shareholders, employing an officer and a director (Squire, 2021).
The certificate of ownership of the restaurant and its future locations shall have both the shareholders’ names. It is important to note that the most likely type of corporation is the private corporation, where each of the shareholders needs to consult their counterpart while selling their shares to a third party. If they register it as a public corporation, they can freely sell their shares.
Business Entity Selection: Can the entity be a partnership?
Yes, it can. This is one of the most likely types of entity for this restaurant business. The two owners will be partners in the enterprise. The share of profits shall rely on their share contributions (Squire, 2021). A partnership is easier to form than a corporation, and the partners benefit from quick decision-making.
As noted above, the partnership is likely to generate $500,000 during the fast year. This is relevant in the decision-making because the entity seeks to open other restaurant locations. Depending on the amount of capital needed, the entity may need to take on more owners, making the entity most likely a corporation (Squire, 2021). Therefore, the entity can either be a partnership or a corporation depending on its profitability and future capital requirements.
Business Entity Selection Reference
Squire, R. (2021). Why the Corporation Locks in Financial Capital but the Partnership Does Not. Vanderbilt Law Review, 74(6).