Assignment 1: Business Formation

Due Week 8 and worth 200 points

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 profitably operate their own club. 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: 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) 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.

Write a two to three (2-3) page paper in which you:

  1. 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. 
  2. 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.
  3. Use at least two (2) quality academic resources in this assignment. Note: Wikipedia and other Websites do not qualify as academic resources.

Your assignment must follow these formatting requirements:

  • Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references must follow APA or school-specific format. Check with your professor for any additional instructions.
  • Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length.

The specific course learning outcomes associated with this assignment are:

  • Prepare transactions related to partnerships and corporations’ stockholder equity, and issue the related financial statements.
  • Determine the concepts for investments and the related accounting transactions.
  • Use technology and information resources to research issues in financial accounting.
  • Write clearly and concisely about financial accounting using proper writing mechanics.

Grading for this assignment will be based on answer quality, logic / organization of the paper, and language and writing skills, using the following rubric.

Points: 200Assignment 1: Business Formation
CriteriaUnacceptable Below 60% FMeets Minimum Expectations60-69% D Fair 70-79% C Proficient 80-89% B Exemplary 90-100% A
1. 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.Weight 40%Did not submit or incompletely provided 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. Did not submit or incompletely recommended which option they should pursue. Did not submit or incompletely justified your response.Insufficiently provided 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.  Insufficiently recommended which option they should pursue. Insufficiently justified your response.Partially provided 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.  Partially recommended which option they should pursue. Partially justified your response.Satisfactorily provided 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.  Satisfactorily recommended which option they should pursue. Satisfactorily justified your response.Thoroughly provided 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.  Thoroughly recommended which option they should pursue. Thoroughly justified your response.
2. 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.Weight 35%Did not submit or incompletely explained the major differences between equity and debt financing; did not submit or incompletely discussed the primary ways in which each would affect the future of the partners’ business.Insufficiently explained the major differences between equity and debt financing; insufficiently discussed the primary ways in which each would affect the future of the partners’ business.Partially explained the major differences between equity and debt financing; partially discussed the primary ways in which each would affect the future of the partners’ business.Satisfactorily explained the major differences between equity and debt financing; satisfactorily discussed the primary ways in which each would affect the future of the partners’ business.Thoroughly explained the major differences between equity and debt financing; thoroughly discussed the primary ways in which each would affect the future of the partners’ business.
3. 2 references; , appropriate use of APA in-text citations and  reference section; Â information literacy / integration of sourcesWeight: 15%No references provided. Lack of in-text citations and / or lack of reference section. Serious errors in the integration of sources, such as intentional or accidental plagiarism, or failure to use in-text citations.Does not meet the required number of references (2), and / or references are of poor quality. In-text citations and references are given, but not in APA format. Sources are rarely integrated using effective techniques of quoting, paraphrasing, and summarizing.Meets the required number of references (2); some or all references poor quality choices. In-text citations and references are provided, but they are only partially formatted correctly in APA style. Sources are partially integrated using effective techniques of quoting, paraphrasing, and summarizing. Meets number of required references (2); all references high quality choices. Most in-text citations and references are provided, and they are generally formatted correctly in APA style. Sources are mostly integrated using effective techniques of quoting, paraphrasing, and summarizing.Exceeds number of required references (2); all references high quality choices. In-text citations and references are error free or almost error free and consistently formatted correctly in APA style. Sources are consistently integrated using effective techniques of quoting, paraphrasing, and summarizing.
4. Writing Mechanics, Grammar,  Formatting, and Clarity and Coherence of WritingWeight: 10%Serious and persistent errors in grammar, spelling, punctuation, or formatting.  Information is confusing to the reader and fails to include reasons and evidence that logically support ideas. Serious errors in the integration of sources, such as intentional or accidental plagiarism, or failure to use in-text citations.Numerous errors in grammar, spelling, and punctuation.  Information is somewhat confusing with not enough reasons and evidence that logically support ideas. Sources are rarely integrated using effective techniques of quoting, paraphrasing, and summarizing.Partially free of errors in grammar, spelling, punctuation, or formatting.Information is partially clear with minimal reasons and evidence that logically support ideas. Sources are partially integrated using effective techniques of quoting, paraphrasing, and summarizing. Mostly free of errors in grammar, spelling, punctuation, or formatting.  Information is mostly clear and generally supported with reasons and evidence that logically support ideas. Sources are mostly integrated using effective techniques of quoting, paraphrasing, and summarizing.Error free or almost error free grammar, spelling, punctuation, or formatting.  Information is provided in a clear, coherent, and consistent manner with reasons and evidence that logically support ideas. Sources are consistently integrated using effective techniques of quoting, paraphrasing, and summarizing