RUNNING HEAD: BUSINESS ENTITY AND CAPITAL STRUCTURE

BUSINESS ENTITY AND CAPITAL STRUCTURE

NAME

INSTITUTION
BUSINESS ENTITY AND CAPITAL STRUCTURE

Value assigned to the organizers equity

Contributions

Andy: $0.5m representing 25% of the equity shares hence total contribution =100/25 x0.5 = $2m

Carrie: 50%/100 x 2 = $1m

Dave: 20% x2 = $0.4m

Naomi: 5% x 2 = $ 0.1m

Total: $2m

Debt payable to the organizers

Dave will receive the following amount: $0.5m+$2m+$5m+$10m = $17.5m which shall be

payable upon commencement of the organization. However, he contributed 20% to equity,

therefore debt payable to Dave is $17.5m- $0.4m = $17.1m

Carrie made $0.1m netting from her designer clothing line and wearable gear. She thus have to

be paid back as debt capital. The amount she owes the company is $1m - $0.1m = $0.9m

Dave and Naomi will bring with them expertise and experience to the company which will be

paid in form of salary.

I will recommend Carrie, Dave, Naomi, and Andy to form a corporation (Tai-Ga limited

company) over the partnership or sole proprietorship. A corporation is vital since owners will not

be liable in case of potential product liability and thus will help protect them from personal

liability incase product use results to an adverse event (Jones, 2016).

BUSINESS ENTITY AND CAPITAL STRUCTURE

Reference

Jones, D. F. (2016). Correspondence regarding changes to corporate structure. Fonds:

[2012.0031]" FLETCHER JONES BUSINESS AND FAMILY RECORDS".