Betty Wilson, a Christian, has considered opening a Christian coffeehouse to be known as “The Gathering Place” in Belmont, North Carolina. She has completed some preliminary research that provided her with two separate franchise opportunities. The first opportunity would require her to adopt the franchise name and trade dress. The second opportunity would require her to move into a turn-key facility and purchase a certain volume of product monthly for a period of no less than 10 years. However, the second opportunity provides training for her and any staff members she decides to hire. She is also aware that other options for opening the coffeehouse may be as a sole proprietorship, partnership, corporation, LLC, or joint venture.
Her husband, John, has stated he would be willing to contribute capital to the coffeehouse. However, he has also stated that he has no interest in participating in the operations or management of the coffeehouse. In other words, he would be a silent partner. Betty’s sister, Alice, a new Christian, has stated she wants to get out of the house and that she would love to be a part of the business. In contrast, Alice’s husband, a non-Christian, does not want her involved in the business and has stated that he expected her to remain a stay-at-home mother to their daughters. Betty’s neighbor, Erma, a non-Christian, has stated that she would like the opportunity to earn extra income and that she predicts the coffeehouse has immense potential with the local big churches in the area, including a Mormon Temple, as well as a Kingdom Hall of Jehovah’s Witnesses.
A sole proprietorship is considered to be the easiest business to start. This is because one person makes all the decisions. Advantages of a sole proprietorship include “easy and inexpensive to form, complete control, and easy tax preparation” (SBA, 2014). However, there are some disadvantages, including “unlimited personal liability, hard to raise money, and heavy burden” (SBA, 2014). The owner is his/her own boss but he/she also no legal separation from the business and is held legally liable for its debts. Furthermore, there are sometimes problems with raising funds, due to lack of collateral.
A corporation refers to “an independent legal entity owned by shareholders” (SBA, 2014). However, these companies are much more complex than a sole proprietorship. Advantages of corporations include “limited liability, ability to generate capital, corporate tax treatment, and attractive to potential employees” (SBA, 2014). In comparison to sole proprietorships, some owners may find that the disadvantages far outweigh the advantages. Disadvantages of corporations include “time and money, double taxing, and additional paperwork” (SBA, 2014). The biggest downfall of corporations is the double taxation, which occurs when profit is made and dividends are paid (SBA, 2014). Therefore, some owners find that this business structure is not worth the extra cost.
A partnership or joint venture is a viable option “if the number of people involved is small (up to about 20) and limited liability is not necessary” (Partnership — Advantages and Disadvantages, 2013). Therefore, this may be a viable option for Betty’s coffeehouse. Furthermore, advantages include the addition of ideas from partners, ease of establishment, more available capital, and ease of legal structure changes” (Partnership — Advantages and Disadvantages, 2013). Disadvantages of partnerships include shared liabilities between all partners, potential for disagreements and friction among partners, and costly valuation of assets if one partner should leave the partnership (Partnership — Advantages and Disadvantages, 2013). For many people, this is an attractive option in order to have more flexibility than a corporation, yet not all of the risks of a sole proprietorship.
A limited liability company (LLC) refers to “a type of hybrid of legal structure that provides the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership” (SBA, 2014). Therefore, many business owners elect to have this structure for their businesses. Advantages of LLCs include “limited liability, less recordkeeping, and sharing of profits” (SBA, 2014). Disadvantages of LLCs include “limited life and self-employment taxes” (SBA, 2014). These disadvantages, especially limited life of the business, can cause the business owner to avoid the investment.
The primary benefit of a franchise is the ability to open a business independently, yet have the support of the home company. Other advantages include “providing an established product, increased chances of business success, and the potentiality of quality levels” (Franchising, 2014). Disadvantages include “not being entirely independent, product restrictions, and limited franchisee agreements” (Franchising, 2014). Franchising requires careful consideration because of all the associated limitations.
Knowing all of this information and Betty’s personal characteristics and situation, it is likely that a LLC, partnership, or sole corporation would be best for the establishment of her coffeehouse. Since John does not want to be directly involved in the business, yet is willing to provide capital, it is recommended that Betty forms the coffeehouse as a partnership. This will allow him to be involved, yet considered a silent partnership in the business.
John should be included in the business because he is willing to provide capital for the initial start-up costs. On a spiritual level, John is Betty’s husband, and opening a business together, even if John is a silent partner, is a way to develop a stronger emotional bond. It may not be wise to accept Alice into the business. The reason for this is that Alice’s husband does not want her to participate. This could cause problems for the business. For example, there may be a confrontation between Alice and her husband at the coffeehouse. Therefore, in order to promote a strong spiritual experience within the coffeehouse, the energy needs to be strictly positive. With Alice’s husband not wanting her to participate within the business, it is possible that the energy of the coffeehouse could have some negativity attached to it. Betty’s neighbor, Erma, may be a viable option for inclusion if the business. The reason for this is that she may have the means to advertise the coffeehouse to the big churches, as well as provide ideas on how best to promote the coffeehouse to other religious foundations.
Currently, “The Gathering Place” is used by two different corporations in North Carolina (Name Availability, 2014). Therefore, this is not a usable name at this time. Betty will be better served to develop a new name that projects her values and dreams for the coffeehouse, yet is individualized and unique. This can help promote the coffeehouse by drawing in more consumers.