Alex, Bill, Carl, and Devon inherit from their Dad an operating

Added on - 25 Sep 2019

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Alex, Bill, Carl, and Devon inherit from their Dad an operating organic farm in New State. The farmincludes an orchard, various vegetable garden tracts, fields usually planted in grains, several trout ponds,and a poultry operation. In addition to selling the various organic products, the farm usually invites thepublic in each year during the fall for a corn maze, pumpkin patch, and other amusements. Alex, Bill, Carl,and Devon were never interested in farming, so their cousin, Xavier, was trained to run the farmingoperation by Dad and has been helping Dad do so for the past 5 years. Xavier wants to continue to dothat, and Alex, Bill, Carl, and Devon are willing for him to continue to do that. Therefore, they want to forma business entity to own the farm, which Dad ran as a sole proprietorship. Obviously, they don’t want a lotof formalities or complexities to “fool with” since they want Xavier to handle the day-to-day operations ofthe farm. Further, they want to minimize their taxes on the entity, they want to avoid any personal liabilityfrom the farming operations, and they want to keep the business in the family (it might be fine to sellinterests in the business to their kids or to Xavier, but they would not want a stranger owning part of thebusiness).They have discussed the deal with Xavier, and he is very excited. In fact, he proposes that the businessborrow an additional $500,000 and expand its operations to include a vineyard. There is a bank willing tooffer financing, but Alex, Bill, Carl, and Devon would have to be willing to sign personal guarantees. Theyare still thinking it over, but they probably will proceed with Xavier’s plan for expansion.They want you to be their accountant in New State, and therefore they come to you for advice as to whichwould be the best form of business organization to use for operating of the farm.Alex, Bill, Carl, Devon, and Xavier are all Christians and want their business to be organized andoperated in accordance with the Christian worldview.In view of their situation described above, which form of business organization would you recommend?Explain fully, including the strengths and weaknesses of each form of business organization and be sureto make application to the specific facts of this situation. Assume for the purposes of this assignment thatNew State has typical statutes governing business organizations and that New State’s taxation ofbusiness organizations follows the federal regime.
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