Question

Question 42 26 points Save As Jennifer who is a local inventor developed a pill that is to help people lose weight. She firmly believes the pill will address the obesity problem that has plagued the United States over the past years, Jennifer seeks your advice as she wants to create a new company, but is unsure of the direction she should go. She is looking to ony own 50% her company and have the other 50% to be owned by an investing firm. Although she believes the pills are safe, there is major concerned about liability if someone becomes sick or dies. The best form of businóss organization for the new company is: Sole proprietorship with Jennifer as owner and the drug company as creditor or investor. General partnership with Jennifer and the drug company as equal partners. S-type corporation with Jennifer and the drug company owning equal shares Limited liability company with Jennifer and the drug company owning equal shares

Answer 1

The conditions of Jennifer’s case:

• Wants to start a company
• Wants 50% ownership and 50% to the drug company
• There is a contingent liability, of people getting sick

Now: what she can have:

• Partnership
• Company

She can’t go for sole proprietor, because of her second condition

Now, in partnership firm, the liability of the partners is 1005 , so in case of loss they would be fully liable. So that is also not the case applicable here.

Now, although both S- type corporates and limited liability corporates provides limited liabilities, there are certain difference between them:

• In S type, the owners are not completely liable but liable upto their share in the company, whereas in limited liability, the owners are not personally liable to the company’s debt at all.
• Secondly , in S-type, only individuals can become owners of the company whereas in limited liability, individual and company can become co-owners.

So her best option is D, limited liability company with her and drug company.