Four independent situations follow:
1. Three computer science students have formed a business to develop a new social media application (app)for the Internet. Each has contributed an equal amount of cash and knowledge to the venture. While their app looks promising, they are concerned about the legal liabilities that their business might confront.
2. Shamira Hatami, a student looking for summer employment, opened a small cupcake shop out of her summer vacation home.
3. Robert Steven and Tom Cheng each own a snowboard manufacturing business and have now decided to combine their businesses. They expect that in the next year they will need funds to expand their operations.
4. Darcy Becker, Ellen Leboeuf, and Meg Dwyer recently graduated with marketing degrees. Friends since childhood, they have decided to start a consulting business that focuses on branding strategies for small and medium-sized businesses.
Instructions
(a) In each case, explain what form of organization the business is likely to take: proprietorship, partnership, or corporation. Give reasons for your choice.
(b) In each case indicate what accounting standards, IFRS or ASPE, the business is likely to use in its financial statements. Give reasons for your choice.
TAKING IT FURTHER
What are the advantages of two individuals first forming a partnership to run a business, and later incorporating?