Answer:
Step-by-step explanation:
Incorporating their business allows Nate Smith and Darla Jones to raise additional capital for marketing their smartphone app while maintaining control over the business. They are considering different capital structures to achieve their primary goal of raising as much capital as possible without relinquishing control.
As part of the incorporation process, Smith and Jones plan to receive 50,000 common shares of the corporation in exchange for the net assets of their old business. Once the old company's books are closed and the assets are adjusted to their current fair value, Smith and Jones' capital balances will be equal at $25,000 each.
By receiving common shares in the new corporation, Smith and Jones are able to raise capital by allowing other investors to purchase shares and become partial owners of the business. This enables them to access funds without diluting their control over the company. With equal capital balances, both Smith and Jones will have an equal stake in the corporation and maintain an equal level of control over its operations and decision-making.
This capital structure provides Smith and Jones with the opportunity to attract outside investors and secure the necessary funds to market their smartphone app effectively. By incorporating and structuring their capital in this manner, they can strike a balance between raising capital and retaining control, positioning their business for growth and success.