What are the advantages and disadvantages of changing the company organization from a sole proprietorship to a corporation?

What are the advantages and disadvantages of changing the company organization from a sole proprietorship to a corporation?

WEEK 1 DISCUSSION TOPIC

Use the Discussion Forum below to respond to these discussion topics:

Remember, this is our classroom. After you address this week’s questions, you can respond to any post I put in class for your additional posts, and you should also read and respond to posts from at least two other classmates. Posting 3 times is a MINIMUM expectation. Three posts will NOT earn you an excellent grade “A”. For that you must go beyond the minimum expectation. Use outside research sources in addition to the text book (journals, news articles, etc. — but NOT Wikipedia). Properly document your sources using APA style in-text references and a reference list.

MINICASE: The Nom-Nom Cake Company

Danh and Linh Nguyen formed the Nom-Nom Cake Company in Los Angeles, CA in 2013. Their company produced a variety of specialty cakes. While getting their new company off the ground, Danh and Linh continued to work at their primary jobs. Linh handled marketing and distribution while Danh performed all of the baking. The company grew rapidly and was featured three years later on a popular cooking show, followed by interviews in trendy magazines. Sales really took off after that, and the company began receiving orders from all across the United States and also from overseas customers.

Thanks to this explosive sales growth, Danh and Linh left their “regular” jobs behind and began producing specialty cakes full time. They also hired additional workers to help them keep up with orders. However, the influx of orders has created more demand than they can manage with their current capacity. They are producing as many cakes as they can, but demand for their cakes continues to grow, and they are becoming swamped by larger and increased numbers of orders. A national supermarket chain and a famous restaurant recently contacted Nom-Nom Cake Company about selling their cakes in the supermarkets and featuring them in restaurants all across America.

Danh and Linh have operated the company as a sole proprietorship thus far. Assume they have approached you as a consultant to help manage and direct the company’s future growth. Specifically, they have asked you to advise them on the following questions:

1. What are the advantages and disadvantages of changing the company organization from a sole proprietorship to an LLC?

2. What are the advantages and disadvantages of changing the company organization from a sole proprietorship to a corporation?

3. Ultimately, what action(s) do you recommend Danh and Linh take regarding the company and why?

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