Limited Liability Companies (LLCs)
Prior to beginning work on this assignment, review Chapters 28, 29, and 30 of the textbook, as well as the articles on Changing Legal Structures: LLCs and C Corps, The Pros and Cons of LLCs, and How To Start An LLC In 7 Steps (2024 Guide) which discuss business entities.
Malik, Nia, and Talia are planning to start a catering business in a metropolitan area with a population of approximately 480,000. The target market for the venture will include both the corporate market (employee events, client meetings, etc.) and the private market (weddings, family events, etc.).
The business plan which they have developed has set start-up costs of $800,000. Malik will contribute 55% of the capital for the creation of the new entity, while Nia will contribute 30% and Talia adding 15%. The plan also projects that the company will operate at a loss for the first two years. In the third year, it is projected that the company will realize a profit of 15%, and 20% profit in year four.
Malik is primarily an investor in this new business and does not have any experience in catering or the restaurant industries. However, his family is wealthy, and he is well connected to the metropolitan area. Thus, he would be an asset as being recognized as a leader of the organization.
Nia has been highly successful as a marketing executive in the local entertainment sector. She is also considered to be a very effective social influencer in the area, as well as on social media. As a result, she will be working as the marketing and sales director of the catering business.
Talia is a culinary expert and has been working as a chef at a local restaurant. She has also been operating a small catering business as a sole proprietor on a part-time basis, which is how the idea for the new business venture originated. Talia has worked in several large cities such as Los Angeles, New York, and Rome. Since she is a chef, she does have experience of managing large kitchen staffs. However, she is relatively new to the current market area.
Nia and Talia will work for the organization on a full-time basis. Malik will work as a consultant but will not take part in many of the operational tasks that are involved in running the business. Initially, all other staffing needs will be done with part-time employees.
Based on some discussions Malik has had with his attorney, the group believes that they should form an LLC for the new business. However, they are open to other ideas.
In your paper,
Explain the advantages and disadvantages of using an LLC. Are there any other business forms that should be considered for the initial start-up?
Discuss whether the LLC should be member-managed or manager-managed, addressing the advantages and disadvantages of each.
Discuss how the profits and losses of the business should be shared. This would include addressing the following issues. How should the LLC be taxed? When addressing these concerns, also consider if Malik, Nia, and Talia should receive a salary? If so, how would the amount be determined? If not, how should they be compensated for their work?
Explain why it would be important to have an operating agreement when the LLC is formed.
Assume that in four years the company wants to expand into ten larger metropolitan areas.
Explain if the company should remain an LLC or transition into a new form of business.
The Limited Liability Companies (LLCs) paper
must be 4 to 5 double-spaced pages in length (not including title and references pages) and formatted according to APA
must include a separate title page with the following in title case:
title of assignment in bold font
Space should appear between the title and the rest of the information on the title page.
student’s name
name of institution (The University of Arizona Global Campus)
course name and number
instructor’s name
due date
must utilize academic voice
must include an introduction and conclusion paragraph.
Your introduction paragraph needs to end with a clear thesis statement that indicates the purpose of your paper.
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