Lit1 Task 2

The Manufacturing Business |

To: | All Employees |

From: | Owner |

Date: | 12/30/2015 |

Re: | Business Structure |

Comments: | This memo is regarding changes soon to be taking place at Manufacturing Business.The Manufacturing Business is currently a sole proprietorship. This status is common for most small businesses. The company primarily interfaces with the public. This business also tends to employ many tradesmen, drivers, and subcontractors when work is plentiful. Profit for the Manufacturing Business for this year will be over half a million dollars.However, the Manufacturing Business does face challenges. As a company that interfaces with the public on many levels, there is concern about the level of liability that the company could face. If a delivery driver was injured in a work-related accident, litigation could be devastating for the business. Also, the company would like to expand and its current business organization puts the business at a disadvantage in pursuing expansion. Capital is necessary for such an endeavor. As such, change is inevitable.A general partnership would not be a good choice for a business structure for two big reasons. First, changing to a general partnership would not address the liability issues that the company currently faces. A general partnership would still be subject to unlimited personal liability. Second, it is important to note that a general partnership would not necessarily address the issue of gaining capital for expansion.It is worth noting that a limited partnership is out of the question for similar reasons. While a limited partner would be protected, a general partner would still be subject to unlimited liability in debt and legal matters. Limited partners must remain passive and largely are uninvolved in the management of the business; by remaining so, they are rewarded by being a flow-through entity for the purposes of taxation. That is, profit that is distributed to limited partners is untaxed while...