Question

Jeff comes to consult with you about an idea he has.  He tells you that he does not have a lot of cash to pay but if you help him, he will compensate you with equity in the company.  He talks about a crazy website were individuals can buy and sell books online, something called “Amazon”. Knowing that the book industry is a multi-billion-dollar industry, you agree. Jeff tells you that he needs to form a business entity for his business idea. He wants a company that he can grow while still keeping a close eye on his investors. Jeff has big dreams that that company will one day be a multi-billion-dollar company that sells more than books. Jeff wants the most liability protection possible while still avoiding as much taxes as possible.

*) Please tell me which business entities would you recommend to Jeff, and why? If more than one, please explain the difference between them.  (No IRAC needed)

Answer 1

Jeff can look for private entities which are closely held organisations and he should be trying to float lesser of shares so that it will be e having a better control perspective from the point of Jeff because he will be having the maximum ownership in the company.

Jeff can be adding various kinds of venture capitalists and other private investors rather than floating its shares by going public in nature so he can always be trying to keep the control within its own hand and he should be trying to generate funds through risk management strategies which will be helpful in order to reduce the tax by adoption of proper risk management structure. He maybe willing to offer a very low proportion of his stake to the market and that will not be affecting the overall control of the company so he can also convert this company into a public company and issue shares limited by having a limited liability so he can be having a limited liability public company with low number of shares or we can also have a private company. He can use the tax management strategies to the adequate use in order to reduce the tax liability.