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ACC 3 1 7 Beechwood Bake Shop assignment Bob has been running a small bakery as a sole proprietorship for several years. His business has
ACC Beechwood Bake Shop assignment
Bob has been running a small bakery as a sole proprietorship for several years. His business has grown steadily each year. He is well known for his cookies and cupcakes. In addition, he has Betty, whom he has known for years, provide custom cakes.
Bob owns the small shop that Beechwood operates out of In addition, he has opened up a satellite location on the other side of town. The original location has a kitchen where everything is made, and the satellite location receives a daily delivery of finished product to sell. There is a van, owned by Bob, which is used for the daily delivery, as well as delivery of the custom cakes to various locations when needed.
The satellite location is a small storefront that is owned by Betty. Bettys family has owned the property for years. It is completely paid off and she does not charge any rent for the location. She knows that Bob has always talked about growing the company from a sole proprietorship to a corporation, and they have an unwritten agreement that ifwhen that happens, Betty will become a part owner in exchange for providing the store front.
Bob's daughter, Jessie, has recently moved back to town and has been working at Beechwood. In addition to putting in hours just working the counter at the satellite location, she has begun reaching out to local businesses, primarily restaurants and grocery stores, about selling the cookies, cupcakes, and cakes. She has been quite successful in bringing in some new business, and Bob has started looking to hire another baker to help out with the additional volume.Bob is delighted with Jessie's dedication and success, since he was hoping to one day leave the business to her.
In addition to Bob, Betty, and Jessie, each location has the equivalent of employees working.
Instructions:
Bob's attorney, Haley Boling, has been after him for years to incorporate. She has explained many times that moving from a sole proprietorship to a SCorporation will not only help to limit Bob's potential liabilities, but it can also make it easier to build a business succession plan.
Bob has decided that now is the time to make the change and has agreed to meet with Haley to "get the ball rolling." At their meeting, they hammer out the following things:
Information
The company will become an Scorporation.
Only including common stock.
The ownership interest for the common stock of the new company will be:
to Bob, to Betty, and to Jessie
Haley will handle the legal establishment of the new entity including:
Retitlingtransferring assets from the proprietorship to the corporation.
Filing any necessary statefederal forms.
Creating and issuing shares to the stockholders.
Write page academic summary using the scenario above regarding Bob's decision to move his business from a Sole Proprietorship to an SCorporation:
Support your summary by supplying the following information:
Identify two Pros and two Cons of Business Ownership in an SCorporation:
From a tax perspective, what are the pros and cons of putting the buildings in the company's name or keeping them in Bob's and Betty's name and charging rent?
Will should the stockholders Bob Betty, and Jessie receive a paycheck?
How will this impact the taxes that they pay?
How will it impact the taxes that Beechwood Bakery pays?
Identify four impacts of the owners receiving a paycheck on the taxes paid for an SCorporation. Historically, since the company operated as a sole proprietorship, Bob was responsible for paying income taxes on the profits.
How will that work move this forward as an SCorporation?
Who will be responsible for paying the income taxes?
Will Beechwood Bakery itself pay any income taxes?
Identify four ways income taxes are handled within an SCorporation?
Identify the four income tax forms required for a SCorporation in this scenario.
Identify a transfer within a SCorporation and how it applies to this scenario.
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