Question

Mr J Russia desires to protect and manage his assets for the benefit of his wife and two kids. He approaches you and gives you the following information: 1. The entity object should be certain and lawful. 2. Mr Russia also tells you that he wants the entity to make profit for the benefit of third parties. Identify the type of business entity while explaining how it works, its requirements as well as its advantages and disadvantages.

Answer 1

A corporation is a suitable business entity for Mr. J Russia, offering liability protection for owners and the ability to profit for the benefit of third parties, with both advantages such as limited liability and disadvantages including regulatory complexity.

Step-by-step explanation:

The type of business entity that Mr. J Russia may be interested in, given his desire to protect and manage assets for the benefit of his family and make a profit for the benefit of third parties, is a corporation. A corporation is a legal entity separate from its owners, which provides protection from liability for individual members and has the ability to generate profits through various means such as borrowing from banks or selling shares of stock.

Requirements for setting up a corporation include registering the business with the appropriate governmental body, drafting corporate bylaws, appointing directors, and staying compliant with all legal filings and tax obligations. The primary advantages include limited liability for the owners, potential for raising significant capital, professional management, and perpetual existence. On the other hand, disadvantages may include complexity of formation, regulatory compliance, possible double taxation, and a potential disconnect between shareholders and management.