Research Activity Assignment

High School ・Business ・APA ・2 Sources


Inez is the owner of TechTrac, a computer and IT consulting business. Their clients are usually small to medium sized businesses, colleges and individual home users. Inez plans to expand her business, buy new equipment, and hire an employee. She wants to get more capital and expand TechTrac, but she does not want to lose control of the business. Besides, Inez decided not to take out any loan or use a credit card to obtain additional capital to expand.

As a sole proprietor, what is her best choice to obtain the extra capital to expand and still retain control of the business? Why? (you do not need any other facts to answer the question)


Attributing to the fact that sole proprietors have limited financial access as compared to the other large business ventures, a wise decision must be made on the nature of finance they seek to obtain as they seek to expand their businesses while still maintaining control. Among such an option would include applying and seeking business grants from the private organizations as well as the government. Other than that, sole owners can as well seek contributions from family as well as friends. As stated by Wang et al. (2015), for the two options, the additional capital obtained does not end up reducing the ownership of the business by the sole proprietor, that is, the government, private organization, family, and friends do not seek to be partners in the business as the contributions are made in goodwill to support the sole owner's business.
Read case scenario below and analyze.


Richard and 6 friends plan to start a computer systems, software and technical support business that will (1) design, install and provide support for various computer systems for businesses, (2) sell, install, and provide technical support for businesses for various types of software, and (3) provide general technical support for businesses needing technical help with computer systems, hardware, and/or software. The business name will be Computing Technologies. Richard and friends are prepared to grow the business quickly and initially hire office support staff, a full-time marketing and client relations professional, and approximately 8 technical staff. Richard and his friends are concerned about various types of liabilities for Computing Technologies and think they want to organize the business as an LLC.

A. Discuss specific advantages of organizing Computing Technologies as an LLC.


Their decision to organize their business as a limited liability company (LLC) would present them a bunch of advantages. Such an advantage would include the fact that they would not be held personally liable for the Company's liabilities. For instance, in any instances that the Company fails to meet its debt obligations to their suppliers, customers, employees, or any other creditor due to insolvency, the assets personally owned by either Richard and/or his friends would not be retrieved in any circumstances so as to settle such a liability. Other than that, the LLCs are not compelled to pay taxes to the authorities at the company level as stated in The Legal and Ethical Environment of Business journal (2017) publication. As such, the taxes are paid by the individuals, in this case, Richard and his six friends.

B. Discuss disadvantages of organizing Computing Technologies as an LLC.


As compared to having their Computing Technologies business as a partnership, Richard and his friends face a number of disadvantages if they organize their Computing Technologies business as an LLC, all of which are associated with the idea of maintaining the liability protection of all the members in place (Blair and Marcum, 2015). Moreover, Richard and his friends would be required to pay the unemployment compensation amount, which otherwise they would not have been compelled to if they operated the business in any other organized form other than an LLC. Also, an LLC is expensive to start and operate as compared to a sole proprietorship or a partnership as in the case of the LLCs annual fees are necessary in addition to high start-up capital requirements. Therefore, individual tax liabilities, annual fees, among other liabilities, would be among the disadvantages if Richard and his friends decide to run the Computer Technologies business as an LLC.


(2017). Retrieved 19 April 2017, from http://%20380/TheLegalandEthicalEnvironmentofBusiness_Chapter11.pdf
Blair, E. S., & Marcum, T. M. (2015). Heed Our Advice: Exploring How Professionals Guide Small Business Owners in Start‐Up Entity Choice. Journal of Small Business Management, 53(1), 249-265.
Wang, J., Robson, P., & Freel, M. (2015). The financing of small firms in Beijing, China: exploring the extent of credit constraints. Journal of Small Business and Enterprise Development, 22(3), 397-416.

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