Author:
Michelle Vos, Allan Heaps, Elaine Watson
Subject:
Business and Communication, Accounting, Law
Material Type:
Module
Level:
College / Upper Division
Tags:
  • Business Entities
  • Business Structures
    License:
    Creative Commons Attribution Non-Commercial Share Alike
    Language:
    English
    Media Formats:
    Text/HTML

    Authentic Summative Assessment for Business Entities

    Authentic Summative Assessment for Business Entities

    Overview

    • This assignment provides the opportunity for students to:
    • Compare and contrast the nontax operational features of various entity forms including formalities, rights and duties of owners, liabilities, effect of bankruptcy and dissolution.
    • Develop a list of questions to ask a business owner/client in order to perform an analysis and determine the appropriate entity form for the business.
    • Interview a business owner to determine the owner’s specific needs concerning control, rights and duties, liabilities, taxes, formalities, effect of bankruptcy, and dissolution.
    • Evaluate the owner’s answers to the questions concerning specific needs related to control, rights and duties, liabilities, taxes, formalities, effect of bankruptcy, and dissolution.
    • Recommend an appropriate business form based on the business owner’s specific needs.
    • Justify choices in making a recommendation (justification based on readings).
    • Draft appropriate entity paperwork you would file with the Idaho Secretary of State.
    • Communicate effectively by writing documents that are clear, concise, and compelling.

    Authentic Summative Assessment for Business Entities

    Topic: Business Entities

    Course: BUS 305 - Law for Accountants

    Assignment: Authentic Summative Assessment for Business Entities

    Students demonstrate their understanding of the distinctions between different business entities by writing a memo to their supervisor at a fictitious accounting firm.

    This assignment provides the opportunity for students to:

    • Compare and contrast the nontax operational features of various entity forms including formalities, rights and duties of owners, liabilities, effect of bankruptcy and dissolution.
    • Develop a list of questions to ask a business owner/client in order to perform an analysis and determine the appropriate entity form for the business.
    • Interview a business owner to determine the owner’s specific needs concerning control, rights and duties, liabilities, taxes, formalities, effect of bankruptcy, and dissolution.
    • Evaluate the owner’s answers to the questions concerning specific needs related to control, rights and duties, liabilities, taxes, formalities, effect of bankruptcy, and dissolution.
    • Recommend an appropriate business entity based on the business owner’s specific needs.
    • Justify choices in making a recommendation (justification based on readings).
    • Draft appropriate entity paperwork a business would file with the Secretary of State.
    • Communicate effectively by writing documents that are clear, concise, and compelling.

    Learning Objectives:

    • After completing this assignment, students will be able to:
    • Evaluate the concerns of a business owner and make a well-reasoned recommendation of the appropriate entity form that best meets the needs of the business owner.
    • Students will gain the following knowledge and practical job skills:
    • Evaluate a client’s needs, including aversion to risk (liability) and tax goals, and recommend an appropriate business entity.
    • Draft entity form paperwork to file with the Idaho Secretary of State.

    Readings: the following readings can provide students with substantive information needed to draft the memo:

    Choosing A Business Entity, https://sos.idaho.gov/business-services-resources/choosing-a-business-entity/ (last visited June 3, 2019).

    Choosing a Legal Structure, https://business.idaho.gov/business-essentials/legal-structure/choosing-structure/ (last visited June 3, 2019).

    Business Entities - FAQs, https://sos.idaho.gov/business-services-resources/business-entities-faq/ (last visited June 3, 2019).

    Kelsey Jae Nunez, New Corporate Form Provides More Options for Social Enterprises, The Advocate, Aug. 2017, at 42, available at  https://drive.google.com/file/d/0B0LMliaOGKx4YnBaUmFPYVBwQVU/view (last visited June 3, 2019).

    Kelsey Jae Nunez, Social Enterprise and the Law: Benefit Corporations, B-Corps, Worker Cooperatives, and More, https://docs.google.com/presentation/d/1Qaf6nrr0eYAVOtBp_y-7bxGQa_H9Db5pTAjUD7WDilg/edit (last visited June 3, 2019).

    Kelsey Jae Nunez, General Outline of Formalities Required by the Idaho Benefit Corporation Act, https://drive.google.com/file/d/0B0LMliaOGKx4Xy1ZbF9zc1JDMVU/view (last visited June 3, 2019).

    Choose a Business Structure, https://www.sba.gov/business-guide/launch-your-business/choose-business-structure (last visited June 3, 2019).

    Business Structures, https://www.irs.gov/businesses/small-businesses-self-employed/business-structures (last visited June 3, 2019).

    Guidance on how to use this assignment.

    There are two parts to this assignment. Students will spend approximately 2-3 hours on each part (both parts will take 4-6 hours).

    In prior semesters, the subject of Business Entities was tested through an essay exam. This assignment was created as an alternative method to assess learning. Both parts of the assignment are submitted and graded. Students can submit their document as a hardcopy, to a shared drive, as a Google Doc, or whatever format the instructor indicates.

    I inform students at the beginning of the semester that they need to identify a local business to interview for this assignment, so they have plenty of time to choose the business they will use as their “client” to complete the assignment. However, the assignment can be modified to include a business anywhere in the United States or the instructor can provide a hypothetical business “client” for the student to evaluate.

    After my first semester grading student memo submissions, I now limit the entities students can select. This is because students who selected a law firm, accounting firm, business with in-house legal counsel or a Chief Financial Officer (CFO), etc., did not perform the same level of analysis as their peers, but simply concluded that the current entity was the correct entity for the business. Therefore, I advise my students to not select a business that provides entity selection and formation for their own clients or that has in-house professionals who are responsible for entity selection, formation, and compliance.

    Another practice to watch out for is that students will ask the “client” for information that should be within the student’s expertise in this assignment. For example, in Part 1, students draft questions to ask the client that will generate the information necessary to select the proper business entity. However, many of the questions drafted ask for the client to discuss whether a corporation or general partnership would be a better fit (or why the client does not believe that a Limited Liability Company will work), etc. I remind students that they are the experts and the clients are going to want to know what the benefits and drawbacks are for each type of entity.

    Assignment (instructions):

    Congratulations! You have just landed your first job as a staff accountant. As an entry-level associate, you will have the most direct client interaction. Your boss has asked you to meet with a new client. The client is a business owner who wants advice on whether their current entity form is best suited to meet their personal and business needs. These needs include control of the business, liability, taxes, and formalities associated with the entity form requirements.

    Part 1:

    Since this is your first assignment for the accounting firm, your boss wants to ensure that you will positively represent the firm while meeting with the client. Therefore, your boss would like you to perform some preliminary research on the industry involved for the business and review the nontax operational features of various entity forms typical for this type of business. In addition, you will develop a list of questions you will need to ask the client to evaluate their needs. Please provide this information in a memo to your boss, prior to meeting with the client.

    Part 2:

    After meeting with the client, you will need to summarize your findings and recommend an appropriate entity form that will best meet the needs of the client. You must justify your recommendation with an analysis of the client’s needs against the available entity forms outlining the pros/cons/requirements of each form for the client. You will provide your analysis and recommendation to your boss in a written memo.

    Additionally, you will need to complete the appropriate Idaho Secretary of State paperwork that we will file on behalf of the client and attach this paperwork to your recommendation memo.

    Good luck!

    Planning

    What will the instructor need before the activity?

    Some of the readings are Idaho specific, so the instructor may want to provide links to similar content in their state.

    Training: Background and experience in law or accounting

    Time - 60 minutes to review and revise assignment for instructor’s needs.

    What will the student need before the activity?

    • Assignment instructions
    • Assignment rubric
    • Business owner to interview
    • Access to reading materials
    • Time 2-3 hours for each part

     

    Introduction and warm-up/practice activity for the students prior to Assignment Submission (due date)

    Introduction and instructions

    Review assignment and rubrics

    Warm-up/practice activity (scaffolding)

    Have the student(s) undertake a short activity, such as:

    • Case study(ies).
    • Brainstorm hypothetical businesses for each business entity type.
    • Compare and contrast the pros and cons of each business entity type.

    Students discuss activity(ies) in teams, then report out to the whole class. This in-class activity is not graded, but part of scaffolding for this material/unit designed to assist students in understanding the key distinctions between business entities and how they relate to different types of businesses. Students will be able to identify viable options for the business owner they choose to interview based on that particular owner’s needs.

    Main Activity

    How will the instructor collect the assignment?

    Instructor’s preference. Students can email the completed memo to the instructor as a Word document or Google Doc, students can upload to a shared drive, or students can submit hard copies.

    Graded or not? 

    Instructor’s preference. If grades, instructors can use the grading criteria listed in the attached rubrics (part 1 and part 2).

    Wrap-up/reflection

    The instructor uses this summative assessment to check on how the activity impacted the course LOs. This may, but necessarily, include:

    • Peer review using a rubric.
    • Instructor provides instructions, including that peer reviewer must provide basis for awarding highest or lowest score for each category.
    • Each student is required to review the memo of two peers.
    • Students provide individual feedback directly on memo and/or rubric as they review each peer.
    • Discussion as a whole class.
    • Conclusion and moving forward for the Assignment