Question

Gina Grasscutter has a small lawncare business. Her husband, Hank Hubby, helps her from time to time. Gina’s business is growing faster than the lawns she cuts. Gina comes to you, a new lawyer, for advice on how to protect her business. Using this week’s material, advise Gina on the types of business organizations that might benefit her and why. Also, advise Gina on what, if any, effect HH’s marriage to her and his help for her business might have. For your responses, compare and contrast your advice with that of your peers. Would you take the same approach? What about their advice do you find insightful? What would you change?

Answer 1

I would advise Gina to register her business as partnership. This means both HH and Gina will be owners (or co-owners) of the business. This is because there is no difference when it comes to taxation in its absolute sense between partnership and single owned business. The tax liabilities will be similar. However, there are certain benefits of being co-owners of the business. They will enjoy pass through taxation system. Also as per reports, if an organization is registered as partnership it is less likely to come under scanner and be audited. Finally, if both partners are owners then some of the travel expenses can be adjusted in deductibles. Justifying a business purpose travel becomes easier even if the husband and wife has been on holidays.

Overall, the best form of business structure for Gina and HH is to form a partnership business.