John leases an office and buys computer equipment. Initially, topay for the lease and the equipment, he goes into the business ofdesigning applications for smartphones. He also has an idea for anew software product that he hopes will be more profitable thandesigning apps. Whenever he has time, he works on the software.
Selecting a Business Organization. After sixmonths, Mary and Paul come to work in the office to help developJohn’s idea. John continues to pay the rent and other expenses,including salaries for Mary and Paul. John does not expect to makea profit until the software is developed, which could take months.Even then, there may be very little profit unless the product ismarketed successfully. If the software is successful, though, Johnbelieves that the firm will be able to follow up with otherproducts. In choosing a form of business organization for thisfirm, what are the important considerations? What are theadvantages and disadvantages of each basic option?
