Problem
You have three clients that are all starting businesses and are asking your advice on what corporate form (if any) to use. Note you are expected to explain additional research and not just answer from information only in the book. You also must cite your sources.
Explain out what you would tell your clients structured as overall information and advice that you will tell all three, following by specific advice for each unique client scenario.
The following questions A through G will be answered only once as it will be the overview and information that you provide all three clients regardless of their situation and scenario:
A. A brief overview of the legal entities that a firm can take.
B. What is the relative use of each form of a business in United States and how that has changed over time
C. Why would someone use an LLC instead of a S-Corporation? Include in your answer the limitations on who can own an S Corporation.
D. What form or form of business is immediately not applicable if they want to protect their personal assets from any financial risk and explain why.
E. Explain how they can legally use more than one name for their firm by filing a DBA (doing business as also known as a fictitious name statement) and what that filing process entails.
F. What business form do venture capitalists typically prefer and why?
G. What business form are the companies that trade on the publicly traded exchanges (such as NASDAQ or NY Stock Exchange) and why?
The following questions you will one three times - one answer per question for each Scenario I, II and III.
Scenario I: Three engineering graduate students have developed a new technology that has huge promise for energy storage. They plan to file for a patent and will need to raise money to fund the development of the prototype & subsequent launch of the product.
i. What corporate or business form you recommend that they use given their circumstances and why it is the best for their situation.
ii. What a possible alternative form may be and compare and contrast the two options. One to 1 ½ pages 100 points
Scenario II: This client has been running their own business providing bicycle repair and tune-up services to corporations who in turn offer that as an employee benefit for their staff. The business is one year old and the client wants to open another branch in another city which will be run by someone else, and if that goes well will expand into additional cities. As it grows he would like to offer the managers at the various locations slight ownership in the firms as an incentive.
i. What corporate or business form you recommend that they use given their circumstances and why it is the best for their situation.
ii. What a possible alternative form may be and compare and contrast the two options.
Scenario III: The client and their partner wants to buy an existing restaurant.
i. What corporate or business form you recommend that they use given their circumstances and why it is the best for their situation.
ii. What a possible alternative form may be and compare and contrast the two options.