Question

Green desires to form a new company to manufacture lawn mowers. Green is concerned about having his personal assets exposed to liability for the new company's contracts and torts. Furthermore, he wants to retain control over the company's operations and growth for the next few years. He will need an infusion of equity capital to begin operations. He hopes to take the company public in about five years if it is advantageous to do so at the time. Which of the following types of associations would be best for Green's new company?

a) Corporation
b) General partnership
c) Limited partnership
d) Member-managed limited-liability company

Answer 1

A corporation meets Green's needs for personal asset protection, control retention, equity capital infusion, and the flexibility to go public in the future.

Step-by-step explanation:

Given Green's concerns about protecting his personal assets and retaining control over his company, while also considering the potential to take the company public in the future, the best form of business association would be a corporation. A corporation provides limited liability protection, meaning Green's personal assets would not be at risk for the company's contracts and torts. Furthermore, incorporation would allow for an infusion of equity capital through the sale of stock without being obligated to make payments like with bonds. The ability to go public in the future is also facilitated by this structure, which offers ease in transferring ownership through shares.

Although a limited liability partnership (LLP) could provide some liability protection, it lacks the ease of transferring ownership and the capacity to go public like a corporation. Meanwhile, a general partnership or a member-managed limited-liability company might not offer the level of personal asset protection or the structure suitable for eventually taking the company public that Green desires.