Five Investor Issues to Consider When Choosing a Business 2
As it was said, the type of investor plays significant role in forming an organization (i.e. corporation, partnership, LLC). Here are some other questions that are to help in business form creation.
3. What business forms are most attractive to investors?
Investors like to minimize their risk. That generally means that a business entity that provides a liability shield is preferable. In a partnership, an investor would effectively become a partner by contributing capital and sharing in the right to manage and to receive profits. A general partner has no liability shield, while a limited partner's liability is limited to the amount of his or her contribution. Members in a limited liability company (LLC) also enjoy a liability limitation.
Only corporations provide a true liability shield and can issue stock. Stock can be issued either as voting shares (which allow shareholders some control of the company) or non-voting shares. A corporation can issue just a few shares to a small number of shareholders, including investors, or it can make a public offering to the broader market of investors.
4. Is one goal to raise investment capital without giving up control of the company?
Several business forms allow a company to balance its desire for financing with its desire to retain control within a select group of individuals. In a limited liability partnership (LLP), only general partners exercise management control. A corporation can issue several types of stock, both voting and non-voting. The sale of non-voting shares can prevent dilution of certain shareholders' controlling interest.
5. Might the business eventually become publicly traded?
The only business form that can be publicly traded is a corporation. It is possible for a business to start in another form, then be converted to a corporation. A popular initial form for a business of this type is an LLC. While an unlimited number of members can be added to an LLC, this will eventually dilute controlling interests and can become problematic. Conversion to a corporation will allow the company to decide what types of shares it wishes to issue, and to whom.
Five Investor Issues to Consider When Choosing a Business 2
***Note This page is an Archieve of Publicly released information either through our company or another Press Release organization. We do not "fact check", "Support", nor "Dispute" any of the information provided to us. We are a distribution point and Historical press release research and search service. This information only represents the fact that at one point in time the release was distributed to 1000's of publications both online and off. PRNewsNow will not take sides in any personal or commercial disputes you have with the writer of this press release. We will defend its right to exist blindly and without regards to its political, commercial or personal implications.***
