Question
Three (3)personal trainers at an upscale health spa / resort in Sedona, Arizona, want to start a health club that specializes in health plans for
Three (3)personal trainers at an upscale health spa / resort in Sedona, Arizona, want to start a health club that specializes in health plans for people in the 50+ age range. The trainers Donna Rinaldi, Rich Evans, and Tammy Booth are convinced that they can operate their own club profitably. They believe that the growing population in this age range, combined with strong consumer interest in the health benefits of physical activity, would support the new venture. In addition to many other decisions, they need to determine the type of business organization that they want to form. Should they incorporate as a corporation or form a partnership? Rich believes there are more advantages to the corporate form than a partnership, but he has not convinced Donna and Tammy of this. The three (3) trainers have come to you, a small business consulting specialist, seeking information and advice regarding the appropriate choice of formation for their business. They are considering both the partnership and corporation formation options.
Assume the trainers determine that forming a corporation is the best option. Next, Donna, Rich, and Tammy need to decide on strategies geared toward obtaining financing for renovation and equipment. They have a grasp of the difference between equity securities and debt securities, but do not understand the tax, net income, and earnings per share consequences of equity versus debt financing on the future of their business. They have asked you, the CPA, for your opinion.
should they form a partnership or a corporation?
- Provide a summary to the partners, outlining the advantages and disadvantages of forming the business as a partnership and the
advantages and disadvantages of forming as a corporation. Recommend which option they should pursue. Justify your response.
How do I explain the major differences between equity and debt financing and discuss the primary ways in which each would affect the future of the partners' business?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started