ACCT 511 RESEARCH PROJECT 2 PROMPT
For this research project, you will consider a very practical question. While it may
initially seem unrelated to the Christian worldview, as you study it, you will see that it has deep
implications for the Christian businessperson and the Kingdom of God. The issue is: “which
form of business organization is best for a client in a given situation and how should that entity
be taxed?”
As noted, at first blush, this very practical question may seem to have very little to do
with the Christian worldview. That conclusion, however, would be in error. The Bible is a very
practical book and it is concerned with every facet of our lives. There is no part of the universe
over which Jesus is not Lord (See, e.g., Matthew 28:18). Accordingly, there is no part of our lives
with which He is not concerned.
Further, we as Christians should be good stewards of what God has given us, and we
should be about the business of being fruitful and multiplying and taking dominion over the
Earth (See, e.g., Genesis 1:28–31, 9:1 and 7). A primary means for accomplishing these goals is
through just commercial activity conducted through business enterprises.
Consider this: the Pilgrims and Puritans who settled what is now Massachusetts did so via
the business organization known as a Joint Stock Company. Business enterprises have developed
cures for various diseases. They have built skyscrapers that tower over the landscape like
mountains and dug vast tunnels under the sea beds. Businesses have been essential in
accomplishing this amazing level of dominion over the earth and helping us to be fruitful and
multiply and fill the earth just as God commanded.
Therefore, choosing the right business organization form and tax regime for a new
business is very much a God-honoring endeavor. With that said, now consider the following fact
pattern for this research project:
Alex, Bill, Carl, and Devon inherit from their Dad an operating organic farm in New
State. The farm includes an orchard, various vegetable garden tracts, fields usually planted in
grains, several trout ponds, and a poultry operation. In addition to selling the various organic
products, the farm usually invites the public in each year during the fall for a corn maze,
pumpkin patch, and other amusements. Alex, Bill, Carl, and Devon were never interested in
farming, so their cousin, Xavier, was trained to run the farming operation by Dad and has been
helping Dad do so for the past 5 years. Xavier wants to continue to do that, and Alex, Bill, Carl,
and Devon are willing for him to continue to do that. Therefore, they want to form a business
entity to own the farm, which Dad ran as a sole proprietorship. Obviously, they don’t want a lot
of formalities or complexities to “fool with” since they want Xavier to handle the day-to-day
operations of the farm. Further, they want to minimize their taxes on the entity, they want to
avoid any personal liability from the farming operations, and they want to keep the business in
the family (it might be fine to sell interests in the business to their kids or to Xavier, but they
would not want a stranger owning part of the business).
Page 1 of 2 ACCT 511 They have discussed the deal with Xavier, and he is very excited. In fact, he proposes that
the business borrow an additional $500,000 and expand its operations to include a vineyard.
There is a bank willing to offer financing, but Alex, Bill, Carl, and Devon would have to be
willing to sign personal guarantees. They are still thinking it over, but they probably will proceed
with Xavier’s plan for expansion.
They want you to be their accountant in New State, and therefore they come to you for
advice as to which would be the best form of business organization to use for operating of the
farm.
Alex, Bill, Carl, Devon, and Xavier are all Christians and want their business to be
organized and operated in accordance with the Christian worldview.
In view of their situation described above, which form of business organization would
you recommend? Explain fully, including the strengths and weaknesses of each form of business
organization and be sure to make application to the specific facts of this situation. Assume for the
purposes of this assignment that New State has typical statutes governing business organizations
and that New State’s taxation of business organizations follows the federal regime. Suggest Helpful Resources:
For an excellent article discussing the relative advantages and disadvantages of scorporation taxation and partnership taxation, see Walter D. Schwidetzky, Integrating
Subchapters K and S—Just Do It, 62 Tax Law. 749 (2009). For an excellent discussion of one of
the primary benefits of s-corporation taxation for many closely held businesses, the minimization
of employment taxes, see Timothy M. Todd, Multiple-Entity Planning to Reduce SelfEmployment Taxes: Recent Cases Demonstrate the Pitfalls and How to Avoid Them, 13 Journal
of Tax Practice & Procedure 31 (April/May 2011). Page 2 of 2

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