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.

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.

GPT-4o mini · Answer

### Step 1: Compare and Contrast Chart | Business Structure | Advantages | Disadvantages | |-------------------------------|-----------------------------------------------------------|-------------------------------------------------------------| | **Sole Proprietorship** | - Easy to establish and operate. | - Owner has unlimited personal liability. | | | - Complete control over business decisions. | - Difficult to raise capital; limited funding options. | | | - Simple tax structure; profits taxed once at individual rates. | - Business continuity is at risk if owner cannot continue. | | **Partnership** | - Shared financial commitment and resources. | - Partners share unlimited liability (general partnership). | | | - Diverse skill sets and expertise can enhance business. | - Potential for conflicts between partners. | | | - Relatively easy to establish. | - Profits must be shared with partners, reducing earnings. | | **Limited Liability Corporation (LLC)** | - Limited personal liability for owners (members). | - More complex and expensive to establish than sole proprietorship and partnership. | | | - Flexible management structure and profit distribution. | - May face more regulations and formalities than simpler structures. | | | - Pass-through taxation (avoids double taxation). | - Limited lifespan; depending on jurisdiction, LLC may dissolve upon member departure. | ### Step 2: Venn Diagram ``` Sole Proprietorship ---------------------------------------- | | | - Easy to establish | | - Complete control | | - Simple tax structure | | | ---------------------------------------- | Similarities | ---------------------------------------- | - Can be owned by one or more people | | - Can be profitable | | - Subject to local business regulations | | | ---------------------------------------- | | | Partnership | | - Shared financial commitment | | - Diverse skills | | - Easy to establish | | | ---------------------------------------- Limited Liability Corporation ---------------------------------------- | | | - Limited personal liability | | - Flexible management | | - Pass-through taxation | | | ---------------------------------------- ``` ### Step 3: Compile a Report **Report: Recommended Business Structure for the Campus Coffee Shop** After careful consideration of the available business ownership structures, I recommend forming a Limited Liability Corporation (LLC) for the coffee shop on campus. **Reasons for Choosing LLC:** 1. **Limited Personal Liability:** One of the primary advantages of an LLC is that it protects the owners’ personal assets from business debts and liabilities. This means that if the coffee shop incurs debt or faces legal issues, the owners’ personal finances will be safeguarded, which is crucial for college students who may not have substantial financial resources. 2. **Flexible Management and Profit Distribution:** An LLC allows for flexibility in management structure, meaning that the owners can decide how the business will operate and share profits. This flexibility can be beneficial in a business run by students, as it can adapt to their schedules and constraints. 3. **Pass-through Taxation:** LLCs often benefit from pass-through taxation, which means that the profits of the business are only taxed once at the owners' individual tax rates, rather than facing double taxation as might occur in a corporation structure. This can be financially advantageous for student owners who may have limited income. By selecting an LLC for the coffee shop, we balance the desire for entrepreneurship with the protection and flexibility necessary for young business owners navigating a college environment. This structure supports our vision for a successful campus coffee shop while minimizing risks associated with personal liability.