You are opening a new small business in the Cayman Islands. Your purpose is to earn a profit, so you must establish the business. You may open up your business as a partnership, proprietorship or corporation.
1. Explain why your choice of partnership, proprietorship, or corporation is the best and provide advantages and disadvantages for each. Compare why your choice is the best.
2. Explain why your company will use the accrual method of accounting instead of the cash-based method.
3. Determine what sources of funds you will need to start your business and how those funds will be used.
4. Obtain estimated amounts for the various Assets, Liabilities, Capital, Revenues, Expenses, etc. that you will need to operate your company over the next six months. These “estimates” will be made up of figures you have chosen to use to demonstrate your company’s financial position.
Review at least two peer-reviewed sources to develop a detailed event analysis. Provide three pages, not including the title page and reference page. It must also consist of headings, topic sentences, and a conclusion.
** USE THE OUTLINE PROVIDED BELOW **
**1. Business Structure Analysis**
– Choice: Partnership
– Justification: Flexibility in decision-making and management, shared liability among partners.
– Comparison:
– Partnership: Flexibility, shared decision-making, unlimited liability.
– Proprietorship: Complete control, simple setup, unlimited liability.
– Corporation: Limited liability, complex setup, double taxation.
**2. Accounting Method Selection**
– Choice: Accrual Method
– Rationale: Accurately reflects business’s financial health, matches revenues and expenses when incurred.
– Comparison:
– Accrual: Matches revenues and expenses when incurred, better for long-term planning.
– Cash-Based: Simpler, but may not reflect true financial health accurately.
**3. Sources of Funds and Financial Planning**
– Initial Capital Requirements: $100,000
– Funding Sources: $50,000 personal savings, $50,000 bank loan.
– Allocation of Funds: Start-up costs, operational expenses, marketing.
**4. Financial Estimates**
– Estimated Financial Position for the First Six Months:
– Assets: $150,000
– Liabilities: $50,000
– Capital: $100,000
– Revenues: $200,000
– Expenses: $150,000
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