Chapter 20 in Bagley & Savage Subject: Corporate Governance, Ownership, and Control: Forms of Business Organizations (E.G. Sole Proprietorship/Limited Partnership/Llc/Etc....) Ernie Jameson Is a Design Engineer with a Essay
subject: Corporate Governance, Ownership, and Control: Forms of business organizations (e.g. sole proprietorship/limited partnership/llc/etc....)
Ernie Jameson is a design engineer with a proven track record in the field of electronic instruments. He recently designed new VLSI very large scale integrated chip. This chip is meant to be the heart and soul of a digital sampling keyboard to b called Echo. Jameson believes the Echo will set a new industry standard. He wishes to organize a business enterprise to build and market it. He has a meeting with his lawyer and conveys to her the following bits of information:
a. It will take approximately two years to turn the VLSI…show more content… The company could also be incorporated in a state with more friendly laws to directors and management, “such as Delaware...considered to be pro-management because their statutes and court decisions tend to give control on a wide range of issues to the officers and directors” (Bagley & Savage, 2010, p. 774), which would give Lord more control. The requirements for an S corporation specify a small number of shareholders (“no more than 100” (Bagley & Savage, 2010, p. 761), which are in line with Jameson’s plans.
To maintain significant control over the enterprise, Jameson could maintain a position on the board of directors, as “most state statutes provide that the business and the affairs of the corporation shall be managed, and all corporate powers shall be exercised, by or under the direction of the board of directors” (Bagley & Savage, 2010, p. 780). Jameson could also maintain a majority of shares, or hold a controlling number of shares in the S corporation.
While the LLC is more typically used for raising capital (Bagley & Savage, 2010, p. 760), Jameson has already found investors either willing to invest now or who may invest, provided they can gain tax breaks or a quick return on their investment. By qualifying for flow-through taxation, the S corporation and LLC preclude the possibility of double taxation of both the corporation and the shareholders, which would appeal to his
