Homework: Corporate Governance
You now understand Sally's ambition, how she thinks, her quest for perfection, and her focused vision for future success. From your perspective consider, (i) what form of business, an LLC; S-Corp; or Corp, matches the business platform you have been pursuing with Sally? Based on the information you have now acquired about the direction of the business, (ii) do you perceive the need to change your original choice of formation to one of the other forms? (iii) Why or why not? You have reviewed all aspects of becoming a legally recognized business. You understand the tax issues, the management structure options, raising operating capital, the various types of insurance coverage required, and the necessity of having peace of mind in the event of a catastrophic moment. As a manager-owner, the concept of "Piercing the Corporate Veil" may give you a sinking feeling when confronted with a questionable operating decision that may trigger both company and personal liability. (iv) What steps can you take to avoid facing situations that trigger a court to Pierce, the Corporate Veil of your company? You have a lot to ponder in deciding the best form of governance and assuring the one you select meets Sally's management style. (v) In determining the form of your business organization (an LLC, S-Corp, or C-Corp.) and matching Sally's long-term plans, consider which provides most the security, protection against personal liability, management control, financing capability, and long- term expansion planning. (vi) Would Sally want a Board of Directors managing her menu?
We know Sally successfully operated her own multimillion-dollar business with sufficient business expertise and without a corporate board or shareholders. We know she fully funded her business and carries no debt that would impede this new venture. We know she has worked well with you as a team and owner in the drive to establish this enterprise. Carefully consider these issues before selecting an organizational form.
Sally has found several documents to help pick which type of corporation to form for the business you are building with her. Feel free to use this information. She has shared them here: These documents are listed in the attachment section.
1. Choosing an Entity Comparison Chart (PDF).
2. Business Selection Worksheet (PDF).
3. Forming a Corporation Checklist (PDF).
4. Forming and Organizing a Corporation (PDF).
5. Forming and Organizing an LLC (PDF).
6. Business Structures (IRS).
7. Choose a Business Structure (SBA).
Task
Create a matrix charting the pro and cons and advantages and disadvantages for the following forms of company organizations:
1. LLC
2. S-Corporation
3. C-Corporation
I. Cost: what are the comparative costs of setting up?
II. Ease: what are the relative costs for setting up each?
III. Termination: what is the state requirement for continuity?
IV. Public Information: how important is it that your personal information is shared or not shared with the public
V. Risk: what level of liability exists in the operation of the business based on the type of business itself what is the best form to insulate owners from personal liability
VI. Operation: what form best supports the intentions of the owners what is the best control risk balance form of operation
VII. Capitalization: is there a risk of undercapitalization what would be the impact will there be a need to raise capital to avoid increased liability is there a form that makes it easier to raise capital
VIII. Selling: if owners wish to sell what form best accommodates that situation
IX. State Taxes: what are the tax liabilities from the state in setting up the business
X. Expansion: which form provides the greatest flexibility in the event of expansion
Format your homework according to the give formatting requirements:
1. The answer must be double spaced, typed, using Times New Roman font (size 12), with one-inch margins on all sides.
2. The response also includes a cover page containing the title of the homework, the course title, the student's name, and the date. The cover page is not included in the required page length.
3. Also include a reference page. The references and Citations should follow APA format. The reference page is not included in the required page length.