The Dream Business: A Hybrid Service-Merchandising Company
Starting a Business
Business types are generally classified as either service, merchandising, or manufacturing entities. Oftentimes, however, a business may be involved in more than one endeavor such as providing a service and selling a product at the same time. As far as ownership, a business may be owned by one individual (proprietorship), by two or more persons (partnership), or by many investors (corporation).
Assume that you want to start a business; what would it be? Describe the type of business you would like to start. Would it be classified as a service, a merchandiser, a manufacturer, or a hybrid (more than one) type of business? Conduct research as needed and explain your classification. What form of ownership would you prefer? Proprietorship, partnership, or corporation? If a corporation, what type of corporation? What factors would you consider in making your determination? Research the benefits and potential drawbacks of your chosen form of ownership beyond the information provided in the textbook.
Additionally, list at least three asset accounts and three liability accounts you would expect your new business to have. Explain the purpose of each account to your specific business.
Lastly, assume you were to invest $50,000 cash into your new business venture. Present the journal entry that would be created to record this transaction. Then, show how your ownership interest would be presented in the equity section of the business balance sheet.
Be sure to post at least one reference in support of your explanations and conclusions.
Title: The Dream Business: A Hybrid Service-Merchandising Company
Introduction:
Starting a business is an exciting venture that requires careful consideration of various factors. In this essay, I will outline my dream business, its classification, preferred form of ownership, and the factors influencing my decision. Additionally, I will provide insight into asset and liability accounts that would be expected in my business and present the journal entry for a $50,000 cash investment.
Type of Business:
My dream business is a hybrid service-merchandising company. It would provide a range of consulting services related to sustainable living and wellness while also selling eco-friendly products. By combining services and merchandising, I aim to offer holistic solutions to customers seeking sustainable lifestyles. This hybrid model allows for diversification of revenue streams and enhances customer engagement.
Form of Ownership:
Considering the nature and size of my business, I would prefer a partnership as the form of ownership. A partnership allows for shared decision-making, resources, and expertise, which can effectively drive growth and innovation. It also enables me to collaborate with like-minded individuals who share my vision and values.
Factors Influencing the Determination:
Factors influencing my choice include shared responsibilities and risks, flexibility in decision-making, and the potential for complementary skill sets among partners. Moreover, a partnership allows for easier access to capital through pooled resources and potentially attracts a wider customer base through combined networks.
Research on the benefits and drawbacks of partnerships highlights several key points. Benefits include shared financial burden, access to diverse skills and expertise, shared decision-making, and potential tax advantages. However, potential drawbacks include conflicts between partners, shared liability for business debts, and the possibility of disagreements over decision-making.
Asset and Liability Accounts:
Expected asset accounts for my hybrid service-merchandising business would include:
a) Inventory: This account represents the value of eco-friendly products held for sale.
b) Accounts Receivable: This account records amounts due from customers for consulting services provided.
c) Equipment: This account represents the value of equipment used in service provision and product merchandising.
Expected liability accounts would include:
a) Accounts Payable: This account represents amounts owed to suppliers for inventory purchases.
b) Accrued Liabilities: This account records expenses incurred but not yet paid, such as salaries or utilities.
c) Unearned Revenue: This account represents payments received in advance for consulting services not yet provided.
Journal Entry and Equity Presentation:
To record a $50,000 cash investment in the business, the journal entry would be as follows:
Cash $50,000
Owner's Equity $50,000
In the equity section of the balance sheet, the ownership interest would be presented as follows:
Owner's Equity:
Capital $50,000
Conclusion:
In summary, my dream business is a hybrid service-merchandising company that combines consulting services related to sustainable living and wellness with the sale of eco-friendly products. A partnership is the preferred form of ownership due to its benefits of shared responsibilities, access to diverse skills, and pooled resources. The asset accounts expected in this business include inventory, accounts receivable, and equipment, while liability accounts include accounts payable, accrued liabilities, and unearned revenue. By investing $50,000 cash into the business, the owner's equity is increased by an equal amount. Starting this business will allow me to pursue my passion for sustainability while providing valuable services and products to customers.
Reference:
Investopedia. (n.d.). Partnership Definition. Retrieved from https://www.investopedia.com/terms/p/partnership.asp