Question

Stewed Tomatoes was an "all-girl power-pop trio." Its three members realized that many musicians feel stifled when making music in a sterile studio environment while the clock ticked away expensive hours, so the three girl band members created Materville Studios, a multimedia production house and recording studio in downtown Chicago. They share work responsibilities and profits equally. What type of business ownership is represented here? What are two risks and two benefits in this type of business? Why is this the best business model in these circumstances?

Answer 1

Answer:

What type of business ownership is represented here?

The type of business ownership represented here is a Partnership.

What are two risks and two benefits in this type of business?

The benefits of a Partnership are:

Simple and inexpensive to  create and operate.

Less governmental regulations and restrictions.

The risk of a Partnership are:

Limited life, it can dissolve if one member decides to step out of the band.

Unlimited liability, Partners are personally liable for any debts of the Partnership.

Why is this the best business model in these circumstances?

Since the band has three members, it can't be a sole proprietership until one band member takes all the ownership of the band and it also can not be a corporation since it's a public company. So partnership is the best business model in which all the three members of the band can be equal partners.

Answer 2

Answer:

The type of business ownership is PARTNERSHIP.

Two Benefits

1. There is availability of more capital for the business: Each one can pull capital from various areas to fund the business.

2. Two heads (or more) are better than one therefore there is adequate division of labour and equal delegation of duties among partners.

Two risks

1. Each partner is "jointly, collectively and severally" liable for the partnership’s debts meaning that, each partner is liable for their share of the partnership debts as well as being liable for all the debts.

2. There is risk of disagreements, redundancy, laziness and friction among partners and management.

In this circumstance, this type of business model is good because it brought about proper usage of the expensive hours which were wasted. Also, it made the work easier in the studio as everyone had opportunity to do one thing or the other thereby reducing the work load on just one individual.

Also, it resulted to better output.