Access over 20 million homework & study documents
search

Borrowing Money to Be Repaid Notes

Content type

User Generated

Subject

Business

Type

Other

Rating

Showing Page:
1/10
Chapter 1
1. Should you use debt or equity? What are the advantages and disadvantages of each
a. Debt
i. Borrowing money to be repaid, plus interest
ii. Advantages
1. Don’t give up part of the company
2. Stated terms
iii. Disadvantages
1. Can go bankrupt because they can force payment
2. Can hurt bottom line because payment has to be made
b. Equity
i. Raising money by selling interests in the company
ii. Advantages
1. Don’t have to make payments on a regular basis
2. Can get help from investors
iii. Disadvantages
1. Have ownership/control of part of the company
2. Might be able to make changes within company
2. How will you organize your business? What are the advantages and disadvantages of
each (sole proprietorship, partnership, corporation, etc.)
a. Sole Proprietorship
i. Advantages
1. Complete control and decision making power
2. sale/transfer at your discretion
3. No corporate tax payments
4. Minimal legal cost to form
5. Few formal business requirements
ii. Disadvantages
1. Can be held personally liable (debt/actions)
2. All responsibilities on sole proprietors shoulders
3. Investors don’t normally invest with sole proprietors
b. Partnership
i. Advantages
1. Easy to establish
2. More capital available
3. Tax advantages
4. Easy to change legal structure if needed
ii. Disadvantages
1. Liability is unlimited
2. Partners liable for each other
3. Disagreements between partners
4. If one partner chooses to leave, it could be costly
c. Corporation
i. Advantages

Sign up to view the full document!

lock_open Sign Up
Showing Page:
2/10
1. Limits liability
2. Shareholders not liable for debt incurred
3. Raise funds by selling shares
4. Tax benefits
ii. Disadvantages
1. More legal hassel/fees
2. Government monitored
3. High taxes (personal and business)
d. S-corporation
i. Advantages
1. Protected assets (limited liability)
2. No federal taxes at corporate level
3. Straightforward transfer of ownership
4. More creditibility
ii. Disadvantages
1. More legal paperwork/fees
2. Tax qualification obligation
3. Stock ownership restrictions
4. Closer IRS scrutiny
5. Less flexibility in allocating income and loss
e. Limited Liability companies
i. Advantages
1. Tax flexibility
2. Less paperwork
3. Limited liability
ii. Disadvantages
1. Self-employment taxes
2. No specific roles for individuals outlined
3. Limited life (member leaves, it is dissolved)
f. Our business chose to go with a a S-corporation because there is less liability,
tax advantages, and gives us more credibility as a business
3. Discussion of what a startup is
a. Starting a company from an idea or product
i. Apple
b. Often brand new, risky idea
Chapter 2
1. What financial statements are there? What is their relevance/what do they show you.
a. Income statement
i. Scoreboard, profit/loss statement
ii. Records flow of resources over time by stating financial condition of
business
iii. Revenue - expenses = net income
b. The Balance Sheet

Sign up to view the full document!

lock_open Sign Up
Showing Page:
3/10

Sign up to view the full document!

lock_open Sign Up
End of Preview - Want to read all 10 pages?
Access Now

Unformatted Attachment Preview

Chapter 1 1. Should you use debt or equity? What are the advantages and disadvantages of each a. Debt i. Borrowing money to be repaid, plus interest ii. Advantages 1. Don’t give up part of the company 2. Stated terms iii. Disadvantages 1. Can go bankrupt because they can force payment 2. Can hurt bottom line because payment has to be made b. Equity i. Raising money by selling interests in the company ii. Advantages 1. Don’t have to make payments on a regular basis 2. Can get help from investors iii. Disadvantages 1. Have ownership/control of part of the company 2. Might be able to make changes within company 2. How will you organize your business? What are the advantages and disadvantages of each (sole proprietorship, partnership, corporation, etc.) a. Sole Proprietorship i. Advantages 1. Complete control and decision making power 2. sale/transfer at your discretion 3. No corporate tax payments 4. Minimal legal cost to form 5. Few formal business requirements ii. Disadvantages 1. Can be held personally liable (debt/actions) 2. All responsibilities on sole proprietors shoulders 3. Investors don’t normally invest with sole proprietors b. Partnership i. Advantages 1. Easy to establish 2. More capital available 3. Tax advantages 4. Easy to change legal structure if needed ii. Disadvantages 1. Liability is unlimited 2. Partners liable for each other 3. Disagreements between partners 4. If one partner chooses to leave, it could be costly c. Corporation i. Advantages 1. Limi ...
Purchase document to see full attachment
User generated content is uploaded by users for the purposes of learning and should be used following Studypool's honor code & terms of service.

Anonymous
This is great! Exactly what I wanted.

Studypool
4.7
Trustpilot
4.5
Sitejabber
4.4