Question

Scenario

Sheila is an engineering student at the Great University in Gainesville. She has developed an idea for a cellphone camera that takes photos of the user and then allows them to be placed in any scene they wish for posting to social media. Sheila believes this product will be highly successful, but she needs to determine how to start her business. She believes that she will start small, but will need to raise money for her projects at some point. If the product is as successful as she believes, then the company may need to sell shares of stock to raise capital for expansion.

Directions

What forms of business should Sheila consider and why?

Which form of business is the least likely to meet Sheila’s needs?

What are the tax consequences of the entity you are recommending?

Answer 1

Sheila should consider sole proprietorship form of business as it will be simple to setup and there will be no complications in decision making. She will decide on the market segment and can seek funds on a personal level for the business in order to fast track customer reach. She can also consider partnership in order to have higher access to credit, but there might be disagreements which could dent the business.

Corporation is the least likely form of business which is likely to meet Sheila's needs as it needs to raise large sums of capital and once set up cannot be undone as fast as possible because of several overheads and rules to setup this form of business entity.

In sole proprietorship Sheila will only have to incur one tax and that is personal income tax. Which proves simple and straightforward.