Business Entities - Case Study Example

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When Stanton would change to this form of business entity, he would be required to change the name of the company to Air Stanton LLC. By doing so, Stanton would be passing on his…
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Running Head: BUSINESS ENTITIES Business Entities [The of the will appear here] [The of the id will appear here] [The of the course will appear here]
[The name of the course number will appear here]
What is your advice to Stanton?
My advice to Stanton is to change his company from sole proprietorship to Limited Liability Company. When Stanton would change to this form of business entity, he would be required to change the name of the company to Air Stanton LLC. By doing so, Stanton would be passing on his liability to the company which would then be considered a separate entity from Stanton’s individual self.

What are the pros that would result in Stanton following your advice?
When Stanton would change the company to a limited liability company, he would then be transferring his liability to the company. The risks and loss of the company would no longer be his own. This is especially important in the aviation industry since the risk of loss is considerably higher as the investment is higher. Therefore if the company faces any loss, Stanton would not have to bear the loss from his individual pocket. Most entities formed in the aviation industry as limited liability companies because of this main reason (Speciale, 2006).
Another benefit of his form of business entity is that Stanton can choose this own tax paying option. As a member of the LLC, Stanton can chose to either be taxed as a sole proprietorship as he was doing before of he can choose to be taxed as partnership or a corporation. Since Stanton would have to pay low taxes as a sole proprietor given the current tax rates, he should opt for taxing his LLC as sole proprietor (Speciale, 2006).
What are the cons that would result in Stanton following your advice?
However, turning the business into an LLC is not without its cons. Stanton would have to face certain disturbances in the business. This primarily includes filing the proper paperwork for turning the company into an LLC which is a long process. Changing the company from sole proprietorship to Limited Liability Company also requires certain investment and the company is no longer a small company operated by one single owner. Also when new members would enter the business, the paperwork for the company would naturally increase as for every major decision, written approvals from the members would be required (Speciale, 2006).
Apart from this, Stanton, by choosing to form an LLC would require new members to join the company. This, in turn, would mean loss of full control over the company. Right now, Stanton is the only investor, manager and controller of the business and therefore he can make any decisions regarding the business. However, when new members will bring their investment in the business, they would demand certain control over the business. As a result, control over the decision making process would be shared (Speciale, 2006).
Also Stanton would now have to share the profits of the company with the members. This would mean decrease in income for Stanton. However, Stanton can expand the business with the new investment from the members which could mean more profits. But even this would not make up for the initial setback of profit that Stanton should be prepared for.
Speciale, R. C. (2006) Fundamentals of Aviation Law, Ohio: Cengage Learning Read More
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