MCGEE Cake Company Essay

IntroductionThe McGee Cake Company has been in argument since early 2005. The high society is a sole proprietorship. They produce a variety of full line cakes and other cake including cheesecake, lemon shell cake, and double-iced, double-chocolate cake. In the past some(prenominal) years, the high society has experienced sales growings cod to features in magazines and this led to the company receiving orders from all(prenominal) over the world. Doc and Lyn McGee two had regular jobs and formed the company mainly due to outside interest. However, with the increase in sales and use up for their product worldwide they both sooner their regular jobs and hired additional staff to handle the influx of the fresh demands. The company still faced issues with cash flow and capacity and the company continued to produce as many product as its assets would allow. The demand for the goods and services have become to great for their current infrastructure and the company is looking for b usiness options (Ross, Westerfield, & Jordan, 2013).As mentioned previously, the company is currently operating as a sole proprietorship. According to our text, a sole proprietorship is a business owned by one person and its the simplest business to start and it the least regulated form of organization. The McGees keep all the profits in this type of business. However, the owner has unlimited liability which performer creditors can look beyond business assets to personal assets for payment of debts. mend proprietorship are limited to the owners life bridge circuit which means which in the end hampers the business able to exploit refreshing opportunities (Ross, Westerfield, & Jordan, 2013, p. 14). A limited liability corporation (LLC) crops and is taxed like a compact but retain the limited liability for owners, basically making it a hybrid of a partnership and corporation. The Internal Revenue Service maintains caution of LLC operations and if a business does not meet certain criteria it lead be faced with double taxation penalties (Ross, Westerfield, & Jordan, 2013, p. 6).There are several advantages and disadvantages of changing the McGee Cake Company from a sole proprietorship to a corporation. A corporation is the most important form of business in the Unites States. Its a business created as a distinct effectual entity composed of one of more individuals orentities. Personal assets are saved from lawsuits and debt collections. Corporations can borrow money, be sued, and even be a world-wide or limited partner in a partnership owning product line in other corporations. A disadvantage is a corporation is statutory person it is not exempt from taxes. The corporation profits are taxed in two ways once at the corporate level when they are earned and once more at the personal level when they are paid out (Ross, Westerfield, & Jordan, 2013, pp. 5-6). findingBased on the information provided by the McGee Cake Company and the red-hot-made expansion of their business. I think the best type of business for their new growth would be a limited liability corporation (LLC). In a LLC, members are protected from personal liability for business decisions or actions of the LLC. This means that if the LLC incurs debt or is sued, members personal assets are usually exempt which is akin(predicate) to the liability protections afforded to shareholders of a corporation. Lastly, the start up costs for a LLC will not break the bank and they can be easy to operate (www.sba.gov/content/limited-liability-corporation-llc).ReferencesRoss, S. A., Westerfield, R. W., & Jordan, B. D. (2013). Fundamentals of Corporate Finance.New York, NY, USA McGraw-Hill Irwin.www.sba.gov/content/limited-liability-corporation-llc. (n.d.). Retrieved whitethorn 10, 2014, fromU.S. Small Business Administration www.sba.gov