Assignment #3

The Ownership Dilemma

In regards to the ownership dilemma for this assignment, I feel that a limited partnership would
be the best course of action for someone in my situation who has worked to build up a small business
into one that has enough demand to warrant sufficient growth. I feel that the partnership is the best
option because of the advantages it offers over both the limited partnership and corporation options.

Specifically, a limited partnership would allow me to not give up a majority ownership stake, in
this case 80%, to someone other than myself. Firstly, since I’m the person with the most expertise, I
would be responsible for running the business and its liabilities while the other partners have the option
to just contribute their money and let me repeat the task of running a successful business. As a result,
the potential liability is only limited to how much the partners are willing to spend and invest. This
method allows me to gain the benefit of limited liability from the corporate structure along with
avoiding the double taxation disadvantage the also occurs with that structure. I also realize that I don’t
need to have specialized individuals for marketing, sales, and communications working for my company
since it is already successful, which is a key advantage of the corporate structure.

Personally, the corporation model has the advantage of limited liability as the corporate entity
would take own more of the responsibility if anything negative were to occur such as lawsuits,
destruction of property (fires, floods), and even supply chain issues from my previous distributors. They
have the advantage of letting me use their resources and expertise they have at their disposal that I
wouldn’t have with a smaller ownership structure. This could involve them borrowing and being liable
for large amounts of money that may be needed for expanding the pizza business. However, this option
also presents some challenges. The first being that going the corporation route will often cost a lot of
fees upfront to set up the structure. This involves legal fees that help establish the share structure and
the voting rights that come with each share as well as fees for documents relating to the sale of my
stake in my pizza business. This would also result in the potential of double taxation and inefficient tax
structure that results in being taxed twice for participating in one business.

The option of a General partnership has the advantage of being relatively simple to form and
would provide a good synergy with the selected individual I choose to pair myself up with, in this case
most likely the four individuals with money since I already know how to run a successful business. Filing
taxes would also be straightforward as it would just encompass a typical profit/loss amount per year.
The disadvantages of this ownership structure is that all partners involved are liable for each other so
any case of a bad apple, or in this case a partner, has the potential to risk all the other partners for
liability involving them. However this can be solved with obtaining liability insurance (Business Faculty
from Ontario Colleges, 2018), so I would not see this as much of a disadvantage as it could potentially be
without the option for liability insurance. Depending on how you view others opinions, a disadvantage
could be the necessity for all partners to work in a cohesive manner and the potential for disagreements
and conflicts that must be amicably settled should the need arise.
 References

Business Faculty from Ontario Colleges and eCampusOntario Program Managers. (2018).
Fundamentals of Business: Canadian Edition [E-book]. eCampusOntario.
https://ecampusontario.pressbooks.pub/businessfuncdn/