Problem
A clothing manufacturer (a VIE entity) has two equity holders. Profits and losses of the VIE are split according to ownership percentage; therefore, Equity holder 1 receives 51 percent and Equity holder 2 receives 49 percent of the profits and/or losses. Equity holder 1 controls all decisions regarding distributing clothing in fulfillment of sales negotiated by Equity holder 2 on the VIE's behalf. Equity holder 2 controls all decisions regarding the design, manufacturing, pricing, and sales of the clothing. Determine which party, if any, is the primary beneficiary? Why?