Three (3) personal trainers at an upscale health spa / resort in Sedona,
Arizona, want to start a health club that specializes in health plans for people
in the 50+ age range. The trainers Donna Rinaldi, Rich Evans, and Tammy Booth
are convinced that they can profitably operate their own club. They believe that
the growing population in this age range, combined with strong consumer interest
in the health benefits of physical activity, would support the new venture. In
addition to many other decisions, they need to determine the type of business
organization that they want to form: incorporate as a corporation or form a
partnership. Rich believes there are more advantages to the corporate form than
a partnership, but he has not convinced Donna and Tammy of this. The three (3)
have come to you, a small-business consulting specialist, seeking information
and advice regarding the appropriate choice of formation for their business.
They are considering both the partnership and corporation formation options.
Assume the trainers determine that forming a corporation is the best option.
Next, Donna, Rich, and Tammy need to decide on strategies geared toward
obtaining financing for renovation and equipment. They have a grasp of the
difference between equity securities and debt securities, but do not understand
the tax, net income, and earnings per share consequences of equity versus debt
financing on the future of their business. They have asked you, the CPA, for
Write a two to three (2-3) page paper in which you:
- Provide a summary to the partners, outlining the advantages and
disadvantages of forming the business as a partnership and the advantages and
disadvantages of forming as a corporation. Recommend which option they should
pursue. Justify your response.
- Explain the major differences between equity and debt financing, and discuss
the primary ways in which each would affect the future of the partners’
- Use at least two (2) quality academic resources in this assignment.
Note: Wikipedia and other Websites do not qualify as academic