acct 511 Research_Project_2. Inheritinga Business Opportunity essays 2019.pdf

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Inheritinga Business Opportunity

Abstract

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This paper will thoroughly examine the elements ofAlex’s, Bill’s, Carl’s, and Devon’s

inheritance of an operating organic farm from their father.In doing so, a conclusion will be

drawn in regard to what form of business organization would be the best fit.The children’s

wishes to minimize their taxes, avoid personally liability, keep the farm in the family, and not

havetoworryaboutday-to-dayoperationswillbeconsidered.Theirideaandhopeofexpanding will also

be taken into consideration.The best position to have Xavier, their cousin who will be

TheOpportunityatHand

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Alex,Bill,Carl,andDevonarebeinggivenagreatopportunitybyinheritingthefamily’s

organicfarmfromtheirfather.Duetotheheavyconcernsaboutourenvironmenttoday,organic farming

is growing in popularity.Not only are organic farms better for the environment, they also have

the potential to be more lucrative than conventional farms when operated adequately and

effectively.It has been proven that when taking the appropriate business measures, an organic

farming business can be “22 to 35 percent more profitable” (Harvey, 2015, para. 4).

Minimizingtheirtaxesonthe entity

Leavingtheday-to-dayoperationstoXavier

Keepingtheirfarmingbusinessinthefamily

to focus and see success and prosperity with purpose” (2019, sec. 2).So, the goal is to fulfill all

wishes listed by the new owners of thefarm whilekeeping their religion and faith as the

foundation of the business.

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Inordertoavoidpersonalliabilitywhenitcomestoowningandoperatingthefarmasa

businessentity,thebestoptionistomaketheentityaLimitedLiabilityCompany(LLC).Such entities are

considered as legal persons in the world of law and business, and, therefore, limit a

shareholder’s liability to only what they have invested in the company.This will protect the

personal assets of each shareholder of the organic farming business in question, which fulfills

their desire to avoid personal liability.

the children who have inherited this farm truly want.It is incredibly obvious that these

individuals are strong in their faith and will truly strive to operate their business with their

Christianity as the foundation.Therefore, they are able to form an LLC with no intent to take

advantage of its benefits with malicious intent.

Subchapter S Election after 75 days from the forming of the business.Doing so also offers two

more benefits to the shareholders.Firstly,Alex, Bill, Carl, and Devon will be able to “deduct

corporatelossesfromtheirpersonalincome,ultimatelyloweringhowmuch[they]havetopayin taxes”

(McGraw-Hill, 2019, pp. 465).Secondly, the S Corporation formed may not have to pay as much

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as immoral to some.Paying taxes is considered to be a social responsibility and the situation at

hand may bring some to ask if the owners are just trying to avoid their responsibilities.In this

particular case, I certainly do not believe that any one of these individuals have goals to evade

their responsibilities, whatever they may be.As mentioned

previously,IbelievethattheseshareholderswouldworkhardtoremainfaithfultoGodandmake

operator and manager of the daily operations of the farm, the best scenario is to have Xavier

elected as an inside director by the four children who will assume roles as shareholders.This

assignment of roles properly align with the request of the new owners of the farm.

“Shareholdersarenotdirectlyresponsibleforthedailymanagementofthecorporation,butthey elect

the directors who are responsible for that management” (McGraw-Hill, 2019, pp. 474).

farm in ways that are beneficial to them and the overall business.Due to his Christian faith, he

also has a duty to God to act honorably and manage the business with pride and integrity.

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Therearemanycriticalelementsthatcomeintoplaywhenstrivingtokeepabusinessin the

family.These include creating an influential culture, focusing on future generations, and infusing

core family values into the business.All have been proven to increase the chances of keeping a

family business within the original family.

Studies haveshown“thatfamily-ownedbusinessesscoresignificantlyhigheronthings like

worker motivation and leadership” (Luster &Abernathy, 2015, para. 5).This is due to having a

legacy within the family can be an incredibly motivating factor for current members of the

business and future generations.

Focusing on the long-term goals of any organization is beneficial, but this proves to be

immensely true in regard to family-owned organizations.“According to the Family Business

Center, successful family business leaders focus on the next generation, not the next quarter.

surprised that this was proven to be true.It would be critical for all four owners of the family

farm to focus on future generations as well as their own in order to keep the business going

strong for the many years to come.

Infusingthevaluesandbeliefsofthefamilyintotheorganizationanditsoperationshelps

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environmentinwhichemployeesfinditeasiertoremainloyaltotheorganizationitselfandactin ways

that will be beneficial to the organization as a whole and its shareholders.Having family core

values and faith be the basis of all policies and procedures that employees work with everyday

also creates greater work ethic and motivation.Instilling strong and reputable values so that they

remain intact within the organization and creating a legacy to be proud of are key

factorstohavingfamilymembersmotivatedtokeepworkinghardtohavethebusinessremainin the

additional $500,000 andAlex, Bill, Carl, and Devon will need to sign personal guarantees.

inside director.He is directly involved in the current activities of the business, so his ideas and

decisions are likely to be more sound and, therefore, successful.It would be beneficial for all

fourshareholderstogenuinelyhearhimoutoncertainissuesandtakehisthoughtsandideasinto

increasestheir liability.However,becauseXavierissoheavilyinvolvedin alloperationsofthe

business,Ithinktheywouldbesmarttolistentohim.Itwouldbeuptothemandtheamountof trust they

have in Xavier to decide whether or not they want to sign in order to receive the loan for

expansion.

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Having faith as the foundation of any organization and its activities is an element that

greatly contributes to all aspects of the success of a business, not just in financial terms.It creates

a strong sense of unity amongst members of the organization and promotes ethically sound

behavior and decision-making.Such results not only yield success, but also serve God and fulfill

His hopes for humanity.I applaudAlex, Bill, Carl, and Devon for striving to do so. As 1

Corinthians 12:14 states, “For the body is not one member, but many” (NIV).The body of Christ

option for them would be to form an LLC, make an S Subchapter election 75 days after the

formation of the business, and take their positions as shareholders electing Xavier as an inside

director.I make this recommendation heavily weighing on their goal to incorporate their faith

guarantees.However,consideringXavier’sthoroughexperienceandknowledgeofthefarming

business and its operations, it may very well be a beneficial strategic decision to make for the

success of the business.In the end, the shareholders’decision to take the risk does largely

depend on how much trust they have invested in Xavier.

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AslongastheykeepGodintheirheartsandontheirminds,theywillachievetheirgoal of creating

a business that illuminates the efforts of incorporating their Christian values.

Building an organizational culture and legacy based off of such values will also assist in

enhancing motivation to keep the business in the family.Undertaking all of these things will

certainlyfulfillallofthegoalsandrequestsbroughtforthbyAlex,Bill,Carl,andDevon.Itmay even lead

to great success in the long-run.