Question

Homer, single & Marge, married with one child, are starting a business to provide computer consulting services, web design and software development. They will locate in Los Angeles, California. Homer is willing to contribute $50,000 to the business. Unfortunately, Marge has no money to contribute, but has the computer expertise, the essential contacts and is a graduate of the UCLA Anderson School. In fact, Marge already has two potential new clients, one located in Arizona. They hope to open a second office in Arizona within a few years. They would like to participate equally in making all decisions. They estimate that $100,000 will be enough money to pay all expenses for 12 months at which time they project that revenues will cover expenses. Homer and Marge plan on reinvesting most of the earnings with the goal of expanding and selling the business. They have decided on the name Virtual Construction, Inc., but will be doing business as "Vircon."
Assuming a few friends of Marge’s, (Sven, Harry and Steven) feel the business will be very successful and would like to invest. Sven lives in and is a citizen of Sweden. He only visits the United States once or twice a year. They are all content to be passive investors.

A) What form of legal entity do you recommend if only Homer and Marge decide to participate in this business venture and why?
B) What form of legal structure do you recommend if Homer, Marge, Sven, Steven, and Harry participate, and why?

Answer 1

Answer:

A) The type of legitimate substance which I prescribe if just Homer and Marge choose to take an interest right now is General Partnership. In the general association the entirety of the accomplices are similarly answerable for the business' obligations and liabilities. All the accomplices are permitted to deal with the board of the organization. Without an announcement to the opposite in the association understanding, each accomplice has equivalent rights to control and deal with the business. Accordingly, consistent assent of the accomplices is required for every significant activity attempted. Be exhorted, however, that any commitment made by one accomplice is lawfully authoritative on all accomplices, regardless of whether they have been educated. Here one can likewise have a decision as to be dynamic accomplice.  

B) The type of lawful structure which I do suggest if Homer, Marge, Sven, Steven, and Harry partake is Limited Partnership. This is on the grounds that in a constrained organization, at least one accomplices are general accomplices, and at least one are restricted accomplices. General accomplices are by and by subject for the business' obligations and decisions against the business; they can likewise be legitimately associated with the administration. Restricted accomplices are basically financial specialists (quiet accomplices, in a manner of speaking) who don't take an interest in the organization's administration and who are likewise not obligated past their interest in the business.