Problem
Financing a Start-Up Company requires decisions that can have a significant financial and legal impact on the company. Debt provides leverage, which magnifies return on equity, but, unlike equity, debt requires fixed payments that may lead to cash flow problems and potentially to the demise of the company. Too much debt also is a factor under the undercapitalization theory that can lead to piercing of the veil of liability. In this assignment, you'll explore these issues.
Describe how you would finance a start-up company. What percentage of the initial financing would be from equity v. debt, and why? What type of debt and equity would you use?