Based on the facts provided, please advise Sofia whether she should operate her sailboat charter business as a sole proprietorship, a partnership or as a corporation.

It is recommended that you consider, amongst any other possible factors, the following:

Sole ProprietorshipPartnershipCorporation

Decision-Making

Capital Contribution

Profit Distribution

Income Tax

Liability

Other factors you may wish to consider include: succession planning, perpetual existence, joint and several liability; fiduciary duties; and marketability of business.

Sources: Your textbook; power point slides; and class discussions

Hypothetical Fact Pattern:

Sofia has always wanted to start and build a successful business.As a child, she watched her mother and father operate their family-owned restaurant.Now, she is ready to go out on her own.Sofia loves the water and wants the beautiful coastline of Nova Scotia to be part of her business.Given this, she sets her sights on starting a day-tour and charter boat business that operates from the Halifax waterfront and includes charters to most any coastal destination in Nova Scotia.She wants to have entertainment on the boat and serve food and alcohol.

In order to start the business, she will need a big sailboat, a Halifax waterfront dock space, a few people to help her sail the boat and take care of guests (i.e., maintain boat, inventory levels, prepare food, serve food/drinks).

As she explores the idea, it becomes apparent that she and the boat will need, amongst other things, to be coast guard certified, the boat will need to be licensed, and crew trained.

Sofia has $5,000 and $12,400 in assets.However, she requires an additional $5,000, plus another $12,400 in assets to qualify for the government guaranteed small business loan program.This loan would pay start-up costs.

Sofia knows a lot about boats but very little about hospitality tourism and business management.Her strengths are sailboats and sailing.She is unsure how to market a business or set up partnerships with resorts that may want to offer stay and sail packages.

Sofia's father always told her not to own or operate a business with a partner.However, her friend, Daniel, has a business degree, wants to start a business, and has exactly the same resources available to him as she has, namely; $5,000 and ability to provide bank security in the amount of $12,500.If he was part of the business, the business could happen.

Sofia has reservations about Daniel being part of the business.She wants to have total control over the boat and would really like someone else to do the marketing and networking.