Four independent situations follow:
1. Tom Courtney, a student looking for summer employment, started a dog-walking service. He picks up the dog while its owner is at work and returns it after a walk.
2. Joseph Counsell and Sabra Surkis each own a bike shop. They have decided to combine their businesses and try to expand their operations to include snowboards. They expect that in the coming year they will need funds to expand their operations.
3. Three chemistry professors have formed a business that uses bacteria to clean up toxic waste sites. Each has contributed an equal amount of cash and knowledge to the venture. The use of bacteria in this situation is experimental, and legal obligations could result.
4. Abdur Rahim has run a successful but small organic food store for over five years. The increased sales at his store have made him believe the time is right to open a chain of organic food stores across the country. Of course, this will require a substantial investment for inventory and equipment, as well as for employees and other resources. Abdur has minimal personal savings.
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
Frequently, individuals start a business as a proprietorship and later incorporate the business. What are some of the advantages of doing this?