Four Friends Choosing a Business Form

Alicia, Betsy, Clare, and Don meet once a week to play bridge. During the course of one such meeting they begin discussing the possibility of going into business together.

Alicia, who is 30 years old, is currently working as a baker for Fresh Stuff Bakeries, earning $40,000 a year. She loves her work but has long dreamed of opening her own bakery. She even has a name picked out - We BakeUm Fresh. Unfortunately, she is a single parent raising two small children and does not feel she can afford to invest any of her approximately $10,000 in savings into such a business. Her friends, however, think that they may be able to help.

Betsy, a 62-year-old retired school teacher, just won $150,000 in the state lottery. In addition, she has $250,000 in retirement savings. Enjoying her retirement, she does not feel she would want anything to do with the day-to-day running of a business. However, assuming her money would not be at risk, she would be willing to invest up to $100,000 in the business.

Clare, a 20-year-old college student, recently inherited a small two-story building, worth $200,000, in the downtown area that could easily house a bakery. She would be too busy with classes to help run the business, but she would be willing to let the others use her building to house the bakery.

Finally, Don is 25 years old. He currently works odd jobs for a local landscaping company. However, he feels that he is a born salesperson and manager. Of the $10,000 he has in savings, he feels he could contribute up to $5,000 toward the business. He would love to quit his current job, at which he earns$25,000 a year, to serve as the bakery salesperson and manager.

Consider which business form these four people should select. Briefly state the specific advantages and disadvantages of the following forms of business: sole proprietorship, partnership, corporation, and limited liability company (10 points).

Identify which form of business each person would likely prefer to use (HINT: don't just repeat what the textbook says about the business forms) AND explain what would be both good and challenging for each friend in this particular bakery business (20 points)

Use the information in the scenario.