Car Wash

  • -

Car Wash

Category : Articles

Car Spa
This research paper lays out a proposed plan for a small business in the form of a sole proprietorship. The proposed business idea is for a Car Spa. A Car Spa is essentially a car wash business that offers quick washing and detailing of automobiles. The proposed business is specific to the concept of ???hand washing??? because there is a certain clientele that requires this type of service. This paper elaborates on certain facets of this business like; advantages/disadvantages of the business model, financial statements, tax implications, and a rationale for this specific business choice.
Advantages/Disadvantages of Sole Proprietorship
A sole proprietorship has certain advantages such as possessing complete decision-making and control over the business. This type of business model also offers the proprietor the option to sell or transfer the said business at his or her discretion. Other advantages include not paying corporate taxes, and legal costs are at a minimum. The last advantage of this business model is that it requires very few if any formal business requirements (All Business.com, 2007).
Some of the disadvantages associated with a sole proprietorship are, liability of debt and liability of obligations to the business. These are personal liabilities that come with this business model and the burden lies with the sole proprietor. The sole proprietor is liable for any incurred liabilities arising from acts committed by his or her employees. A sole proprietorship is subject to strong scrutiny by outside investors, and business decisions and responsibilities are the sole discretionary burden to the sole proprietor. Business financing for sole proprietorships come in the form of personal assets and business loans. Given the current state of today??™s economy, the latter may prove to be a potential challenge or set-back (All Business.com, 2007).

Advantages/Disadvantages of a Partnership
According to Kieso, Kimmel, and Weygandt (2003),??? a partnership is an association of two or more persons to carry on as co-owners of a business for profit.??? Some advantages associated with a partnership type of organization are, costs are significantly lower when conducting business with participating clients. Partnerships create a steady stream of business with fewer clients, and allow dedication to resources. Partnerships bring added knowledge to the business and combining the skill of the partners serves as a valuable information resource (Boughton, 2002).
Disadvantages of a partnership type organization range from liability to creditors to having the assets not reverting legally to the original contributor in a case such as dissolution. Net income or net loss is shared equally by partners. Other disadvantages associated with partnerships are, unlimited liability, limited life, and mutual agency (Kieso, Kimmel, and Weygandt, (2003).
Types of Financial Statements
The types of financial statements associated with partnerships and sole proprietorship are, income statement (shows the profit and loss of the business), balance sheet (statement of capital balances of each partner), and partner??™s capital statement (explains the changes in partner??™s capital account throughout the year) Basic Partnership Accounting, (2011).
Tax Implications (Sole Proprietorship)
Sole proprietorship offers the tax advantage of avoiding double taxation however there are higher income taxes. Sole proprietors can deduct business losses to the extent of total income from sources, including interest, dividends, and gains from the sale of nonbusiness property. As a sole proprietor, deductions for health and life insurance are null and void based on an updated Internal Revenue Code implemented in 1994 (“Doing Business As A Sole Proprietor,” 2011).
Tax Implications (Partnership)
Partnerships formed as a business model are subject to certain tax implications; general partnerships expose partners to joint and unlimited liability. For example a partnership with three partners binds parties to the terms and conditions even if one partner does not consent to the contract terms. Operating losses yield immediate tax benefits to a partner with sufficient basis. Losses incurred in a partnership are deductible only to the extent of that partners at-risk amount. Distributions of cash or property in partnerships are generally tax-free up to the specified basis, however; if distributions are of a disproportionate measure; applicable taxes apply (Gesiko, 2008).
Legal Implications (Partnership)
Some legal Implications with partnerships and vary from state to state. Some states specify gender laws in that same sex and opposite sex couples may register as a domestic partnership. Gender specific discrimination issues could have legal ramifications if a partner receives unfair treatment in the partnership based on gender, and title VII violations could carry serious legal consequences, (Presser, 1991). Another legal implication consideration in a partnership is Fiduciary duty. This duty implies that partners must act in good faith and not manipulate other partner affairs. Breach of this duty in a partnership could expose a partner to legal action (Breach of Fiduciary Duty, 2000).
Legal Implications (Sole Proprietorship)
Legal implications for a sole proprietorship involve financial and legally liability for debts and legal actions against the business. Both personal and business assets of a sole proprietor are subject to creditor claims. Lawsuits from creditors are filed directly against the sole proprietor, and if successful, the sole proprietor has to pay any fines from his or her own finances (“The Basics of Sole Proprietorships,” 2005).
Accounting Implications (Partnership)
In a partnership, each partner must maintain a capital account to track and record any change in their financial position, Partners also must take into consideration the likelihood of a partner withdrawing from the partnership. If this happens accommodation is given to the difference between the sale price and the worth of shares. If this occurs, capital accounts will receive debit or credit actions accordingly (Bhansali, 2007).
Accounting Implications (Sole Proprietorship)
An accounting implication for a sole proprietorship is the issue of time consumption. A sole proprietor that handles his or her own accounting expends a large amount of time in keeping accurate records of transactions. Another implication is the payment of local, federal, and state taxes. This is in addition to self-employment taxes, as of 2011, the self-employment tax rate was 13.3% on a sole proprietors??™ first $106,800 in income (Howell, 2011).
Unique Service Provided
The unique service(s) provided at the Car Spa is interior car washing, detailing service, and exterior hand wash. These services are augmented by superior customer service at a reasonable rate. The target market target for this unique service is individual car owners, car dealerships, and local businesses. The Car Spa will offer satisfaction guarantees or cash refunds to existing customers.

Choice of Business Organization/Rationale
The choice of business organization for the Car Spa is the partnership business model. Based on the aforementioned concepts, the partnership business model outweighs the sole proprietorship business model in terms of benefits, advantages, and disadvantages. The rationale behind this decision is, forming a partnership affords the business outside knowledge, reduced start-up costs, allows outside investors, and limits liability. These particular benefits are not afforded under the sole proprietorship model. Unlike sole proprietorships, partnerships invest less time in preparing financial documents and have a lower tax burden.
Conclusion
The principles mentioned in this business plan for the Car Spa examine both business models (Partnership/Sole Proprietorship) and the different facets associated with each. Careful examination and analysis is applied to the principles of financial statements, tax implications, accounting implications, and legal implications of both models. After careful consideration of the data, the partnership type business model is preferable for this type of service offered. Given the research, analysis, and results of the plan, the Car Spa is currently positioned for a successful launch as a partnership organization.