Bradshaw, Gall, Cooke and Company

Mark Bradshaw, Cynthia Gall and Grace Cook are all CPAs. They wish to form a company so that they can practice accounting and tax services. Each will contribute money in exchange for an interest in the company. In addition, Grace will personally loan money to the company to cover additional start-up costs. The company will obtain loans from the bank as necessary to cover any other costs. Each individual will be responsible for their own book of business and will sign audit, compilations and review engagements as well as tax returns. They will have anywhere from 10 - 15 employees depending on the time of year. Cynthia will sign and make legal decisions on behalf of the company but will only be able to do so subject to agreement by the other owners.

Superior Air Control Company

Brian, Tony and Rick are starting a manufacturing company in the HVAC industry. The company will manufacture pipes that seal extraordinarily well so that air does not leak out allowing for superior energy efficiency. The pipes will be sold to the home and commercial building industry. Tony, an engineer will work for the company and will provide the value of his services in exchange for an ownership interest. Brian, a salesman and Rich, the President will both work for the company as well but will contribute money in exchange for an ownership interest. Rich will have the ability to sign on behalf of the company and make legal decisions for the company such as entering into contracts, taking out loans and more. The company will borrow from the bank for capital equipment expenditures and operations.

Discuss advantages and disadvantages of the various company structures and why you would select a particular structure (General Partnership, LLC, Limited Partnership etc.) for the set of facts given for each company. Compare and contrast the various company tax structures as they relate to the two different company fact patterns.

Determine what you think the optimal tax structure is for each company. You MUST select one of the structures discussed in the partnership textbook. For example you may select a limited partnership or an LLC or any other partnership/LLC described in the text. You may not select any other type of structure such as a C Corporation or Subchapter S Corporation.