1. Your family purchased property and building. The original purchase price was $ 4,250 many years ago. There is no mortgage.
2. The only costs are building maintenance, taxes and insurance. The rent from the floors above street level provides sufficient income to pay all of the operating expenses of the building, and any overage goes to the senior members of the family not to you and your siblings.
3. You and your two siblings decide that you want to go into the gifts and souvenir business.
4. After a few years in business, you and your siblings are enjoying the fact that the business is very profitable, earning $ 300,000 per year in Net Pre-Tax Profits, which you split evenly as personal compensation as all three siblings spend most of their awake time on site, at the store.
5. Based on this split of profits, each of you makes $ 100,000 per year.
   1. You have calculated that each of you are working 50 weeks of the year, 7 days per week and approximately 14 hours per day. (98 hours per week.)
      1. What is the hourly pay rate for the siblings?
      2. Based on the expenses and their costs as listed below, make some sort of adjustment for each siblings annual income and resultant hourly income. .
         1. Assume that all personal expenses such as parking ($ 200 per month), meals ($300 per month) health care ($1200 per month) and disability insurance are paid by each sibling.
6. At the end of the fourth year, (2019), the siblings meet up and decide that maybe the three siblings should consider another course of action for the family. They ask you to do an analysis of the business and suggest another course of action for the three of you.
7. Based on what you have studied, read and experienced, you decide to start with an analysis of the current business and then you and your two siblings would begin to look for other alternatives to justify the commitment to the company.

FACTS:

1. Current Rent (CR) for the ground floor space (1500 sq. ft.) = $ 0/Month = $ 0 annual rent
2. Market Rent (MR) for ground floor space is $ 150 sq. foot per year= $ 225,000 per year.
3. Current income (CI) per sibling = $ 100,000/yr. for a 7 day work week with 2 weeks vacation (based on $ 300,000/yr. profit). (See Paras. 4 & 5 above).
4. Job replacement income (RI) per sibling (avg.) = $ 80,000/year for a 5 day work week for 52 weeks with two weeks paid vacation and a full range of health and insurance benefits paid for by the new employer.
   1. Replacement Job requires 60 hours of work per week.
   2. Benefits are worth $ 20,000 per year with no employee contributions and no income tax impact.
   3. Everyones tax rate is 50%.

Questions:

Assuming an LLC structure for the business (Souvenirs, LLC.) create a simple balance sheet using the following information and the information above that is needed?

A. Inventory: $ 25,000 at cost

B. Equipment and site improvements: $ 25,000 at cost