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Pr rojectPart P tA

FinancialAcco ountin ng
. hade Sara ahScheh ban Sere enaChai GiorgioSaad Jeff freyMou urad

Fall013

Nowadays,differentbusinessesattempttocompeteondifferentgrounds,in ordertodoso;italldependsonwhichgroundthebusinessisbroughtup.Inall3 mainbusinessorganizationstandoutinthemodernworld,theformthebusinesses choosesisfundamentaltothewayitwilloperate,howitwillbetaxed,whatliability itsownershave;howexpenses,compensationandbenefitsaretreated;andthe problemsthatthebusinessownermayencounterifthebusinessfallsinto bankruptcy. Mostbusinessescanbestructuredinoneofthethreelegalstructures: I. SoleProprietors II. Partnerships III. Corporations Themaindifferencebetweenthe3typesofbusinessorganizationscanbesummed upintoeightmainfactors,thosefactorshelpusbetterunderstandhowthebusiness ismanagedandoperated,howtheownersinvestedtime,moneyandenergyinto buildingasustainableentity.Thefactorsarethefollowing: 1.Formationhowthebusinessisstarted 2.Managementhowitismanagedandoperatesonadailybasis 3.Ownershipwhoownsthebusinessspropertyandassets 4.Profithowthebusinesssprofitsandlossesaredistributed 5.Liabilitywhoisaccountableforthebusinessslegalresponsibilities 6.Taxationhowthebusinessistaxed 7.Stabilitythelengthofthebusinessslife 8.Terminationhowthebusinesscanbeterminated Tobetterunderstandthethreedifferenttypeoforganizationletusexaminehow eachformofbusinessworksandwhataretheadvantagesanddisadvantagesofeach one. TheSoleProprietorship:Thesimplestandmostabundanttypeofbusinessesfound aroundtheworld.ForexampleintheUSitaccountsforalmost73%ofallbusinesses found.Itusuallyisasmallfirmwithnotmorethen8employeesownedbyone person.Asoleproprietormayrunthebusinessdirectlyormayhireotherstorunit, butultimatelyitisthesoleproprietorsdecisionsthatdeterminethefirmsfate. Typically,asoleproprietorperformsmostofthemajorfunctionssuchasoverall manager,salesmanagerandfinancemanager.Sincetheproprietoristhesoleowner ofthebusiness,thereisgenerallynoneedforanyagreementsorformalities. Themajorityofsoleproprietorshipstodayoperateonarelativelysmallscale,where

thecapitalandcreditofonepersonisadequate.Therealcharacteristicfeatureofa soleproprietorshipisnotsize;itistheunlimitedandunsharedresponsibilityofthe soleowner. Themainadvantagesofasoleproprietorshiprelymainlyonitssimplicityand autonomybutalsoonthefactthattheowneristhesolegainerandpayssingletax andbenefitsalsofromshelterincome. Itsmaindisadvantagesarethatsinceitsonlyonemanrunningthebusinessithasa limitedsourceofresource.Alsothereisunlimitedandunsharedliability,ifthe companyfacesbankruptcy. PartnershipsWhentwoormorepeopleagreetocombinetheirresourcesandskills formutualprofit,theyhaveformedapartnership.Itisjustaboutassimpleasthat.: Eachpartnercontributesmoney,property,skills,labor,orgoodwillasthecapitalof thenewfirm.Thepartnersmustagreeonaseparationofownershipandprofits basedonthecomparativevalueofeachpartnersinputs. Twotypesofpartnershipcanbefound;ononehandwehavethegeneral partnershipwhereeachpartnerisfullyactiveinthefirmwithasayinits management.Eachisamediatoroftheotherpartner(orpartners)withfullrightto actforthefirm.Eachisfullyliableforthedebtsofthebusiness,andeachsharesin theprofits.Ontheotherhandwehavethelimitedpartnership,everylimited partnershiphasatleastonelimitedpartnerandonegeneralpartner.Thelimited partnerisnotlegallyliableforallthefinancialcommitmentsofthefirm.Instead,this partnersliabilityislimitedtotheamountofhisinvestingintheproject.Alimited partnerhasnoinfluenceinmanagement,noinvolvementinthedaytodayrunning ofthebusiness.Inessence,thelimitedpartnerislargelyaninvestorinthefirm. Themainadvantagesofapartnershiparethefactthatthepartnersgetalltheprofit andareexemptedfromtypesoftaxationthatcorporationface.Finally,as distinguishedwithsoleproprietorships,partnershipspermitamergingofcapitaland talentandasharingofriskforthegreatergoodoftheventure. Themaindisadvantageinpartnershipisfoundwhenthedeathofonepartner occurs;itwillautomaticallyendthepartnership.Thesecondmajorhandicaprelies ontheunlimitedpersonalliabilityapartnershipcanface.Businessdebtscangobble allofthebusinessassets.Ifthedebtscannotbereimbursedoutofthesepartnership assets,creditorscanattackthepersonalassetsofeverypartner. Corporations:ThebestwaytodescribeacorporationisbydoingjusticetoAmes AmeswhodescribedintheirworkPrivateCorporationshowcorporationscanbe

defined:"abody,createdbylaw,composedofindividualsunitedunderacommon name,themembersofwhichsucceedeachother,sothatthebodycontinuesthe samenotwithstandingthechangeofindividualswhocomposeit,andis,forcertain purposes,consideredasanaturalperson."Thereforeacorporationiscreatedbylaw, itisanintangibleartificialbeingandisviewedasanartificialpersonandissubjectto manyoftheopportunitiesandconstraints. Themaincharacteristicofacorporationisfoundinitslimitedliabilitytowardsits stockholders.Inotherwords,itsallowsinvestorsownpartofthebusinesswith limitingtheirlosses.Thecorporationitselfisresponsibleforitsactionandinnoway arethecreditorsentitledtoclaimthepersonalassetsofthestockholders. Corporationsalsodonotdependsononeperson,unlikethepartnership,the continuanceofexistencebythedeathoranyotherburdenitmayface.Another majorfactorincorporationisthefactthatcapitalcanbeincreasedatanytimeby increasingitscapitalstockforcash,orissuingstocksandbonds. Themainadvantagescanbefoundaspreviouslymentionedinthelimitedliability statusacorporationhastowardsitsinvestorsandinitscontinuityofexistence.It alsobenefitsfromdifferenttypesoftaxationthentheprevioustwobusiness organizationsdiscussed. Themaindisadvantageofacorporationisitsdoubletaxationlawondividendsthat aresharedbythecorporation,whichisverybotheringforcompanieswhoannounce dividendsonannualbasis.

SolarCo.LLP
ThenamespeaksforitselfbutSolarCoLLP.mainobjectiveistodevelopthe renewableenergysectorinLebanon.Thecompanywillbeapartnershipbetween fourowners,SarahSchehade,SerenaChaiban,GiorgioSaadandJeffreyMourad. Sincewewillbeeachinvestinganequalsumofmoneywewillallhaveanequal shareofinputonhowthecompanywillbemanaged.WechosetobeaLLPduetoits easeofcreationanditslowcostofoperationsanditslimitedliabilityprotection.Our mainproductofferingrangesfromhouseholdsolarpanelsforhotwater consumption,tocommercialsolarstripempoweringbillboards,trafficlights,radars oranyothermechanicalentitythatdoesnotrequireabigamountofenergy.The officewillbebasedinareaofDbayehduetoitslowrentalfees. 10/10/12Thegroupafterresearchingandadvicefromthelawyersdecided ontheformofbusinessorganizationandhiredthelawfirmforalllegal matters.Thelawyercharges$1500forthebusinessformation(expensed immediatelyasimmaterial).Paymentisduewithinoneweekoftheservices provided.Theannualfee,forlegaladvice,of$8000ispayableatthe beginningofeachfiscalyear.

AccountPayable:Legalexpenses;Amount1500$DueDate:17/10/2012to ZogheibLawFirm AccountPayable:Legalexpenses;Amount1500$DueDate:01/01/XXXXto ZogheibLawFirm 15/10/12Thegroupelectedtoopenabankaccountinthenameofthe businessinBankOfBeirut.Theyeachinvested$3,000eachandborrowed fromsupportivefamilymembers$10,000tostartupthebusiness.The repaymenttermsarefourequalannualinstallments.

AccountPayable:Familyrepayment.Amountdue:2500$.Dates:(17/10/2013, 17/10/2014,17/10,2015,17/10/2016)dueGeorgesShehadeh,AntonyTouma, YuliaMourad. 15/10/12Asearchwasundertakentofindthebestaffordablelocationfor thebusiness.Anoffice/storewasrentedfor$12000peryear.Oneyearsrent wasprepaid.

CashPayment:12000$toofficeownerElieMoussa 16/10/12Equipmentandfixturesnecessaryfortheoperationswerepurchasedfor $7000fromKhouryHome.Paymenttermsare50%cashandthebalanceisdueinsix equalmonthlyinstallments,payableattheendofeachmonth.Thepurchasedfixed

assetsareassumedtohavea60monthslifeandnosalvage.Themethodof depreciationisthestraightlinemethod. CashPaymenttoKhouryHome:3500$ AccountPayabletoKhouryHome.Amount:583.33$/Month(DueDates: 30/11/2012;31/12/2012;31/01/2013;28/02/2013) 17/10/12Twoemployeeswerehiredforamonthlysalaryof$700and$800. Salariesarepayableatthebeginningofthemonthfollowingthatworked.

SalariesPayabletoEmployeeAElioNajem(700$)andEmployeeBHoussam ezzeldine(800$)duedatebeginningofeachmonth(01/X/XX) 21/10/2012Productsheldforsalewerepurchasedatthreedifferentdates fordifferentquantitiesanddifferentprice/unit.

50x10WSolarPanels(70$/unit)toAsmarPowerPlus.Amount:3500$;Date 20/10/2012 30x30WSolarPanels(120$/unit)toAliezzat;Amount:3600$Date: 22/10/2012 12x100WSolarPanels(230$/unit)toDekwanehMunicipality.Amount: 2760$Date:14/10/2012 TotalCash:9860$ 22/10/2012Fivedifferentcashsalesoccurredduringthemonth.

CashDebit:8000$(Dates:14/10/2012;16/10/2012;20/10/2012;25/10/2012; 26/10/2012) 23/10/2012Tendifferentcreditsaleswereallowedduringthemontheach withadifferentduedate. OnCreditsales:

A/R:1000$(DueDate15/11/2012)fromAsmarPowerPlus A/R:2500$(DueDate25/11/2012)fromAwadElectric A/R:1300$(DueDate30/11/2012)fromElectroPlus A/R:1200$(DueDate20/11/2012)fromCompuWorld A/R:860$(DueDate09/11/2012)fromAsmarPowerPlus A/R:1450$(DueDate12/12/2012)fromSinElFilMunicipality A/R:730$(DueDate26/10/2012)fromAsmarPowerPlus A/R:980$(DueDate26/10/2012)fromElBachaElectronics A/R:3000$(DueDate05/11/2012)fromElectroTonino A/R:4500$(DueDate05/12/2012)FromAwadElectric

30/10/2012SeveralA/Rwerecollected.

CreditA/RDebitCash:730$fromAsmarPowerPlus CreditA/RDebitCash:980$fromElBachaElectronics 30/10/2012SeveralA/Pwerepaid.

PaidA/P2300$CreditCash2300$On30/10/2012Paidto:GlobalTradingLtd PaidA/P1800$CreditCash1800$On30/10/2012Paidto:SolarPowerMan Enterprises 01/11/2012SalarieswerepaidonNov1forOctoberservices.

SalarypaidtoElioNajemforOctober2012700$; SalarypaidtoAliezzeldineforOctober2012800$; 15/11/2012Fivedifferentcashsalesoccurredduringthemonth.

ReceiveCash:1200$(Date:04/11/2012)toAsmarPowerPlus ReceiveCash:1600$(Date:06/11/2012)toAsmarPowerPlus ReceiveCash:900$(Date:11/11/2012)toElBachaElectronics ReceiveCash:2100$(Date:12/11/2012)toAwadElectric ReceiveCash:1400$(Date:13/11/2012)toHoussamHelou 17/11/2012Tendifferentcreditsaleswereallowedduringthemontheach withadifferentduedate.

A/R:12000$(Dates:04/11/2012,04/11/2012,06/11/2012,08/11/2012 11/11/2012,12/11/2012,14/11/2012,16/11/2012,16/11/2012,17/11/2012) 20/11/2012SeveralA/Rwerecollected.

A/RfromAsmarPowerPluscollected.Amount1860$ A/RfromCompuWorldcollected.Amount:1200$ 21/11/2012A/PdueduringNovemberwaspaid.

Paymentofaccountpayable:5000$ForGlobalTradingltd Paymentofaccountpayable:7500$SolarManEnterprises

22/11/2012Productsheldforsalewerepurchasedatthreedifferentdates fordifferentquantitiesanddifferentprice/unit. 100x10WSolarPanel(50$/unit)purchasedfromGlobalTradingCo Amount:5000$ 25x100WSolarPanel(200$/unit)purchasedfromGlobalTradingCo Amount:5000$ 80x30WSolarPanel(90$/unit)purchasedfromSolarPowerMan EnterprisesAmount:7200$ 25/11/2012Distributionstoowners(ifanycashavailable).

Distributionofownersequity:13500$