Question

Kinetic Solutions, LLC, is an Internet software business with 15 members. Five members are the only managers of the business; the other 10 members are only investors. The five managing members want to sell part of the business to public investors. Before doing so, they opt to organize the business as a corporation. The five controlling shareholders want to be able to manage the corporation with little interference from other shareholders, and they want to continue to be compensated as managers of the business. The other 10 shareholders want some management control because of their sizable investments, especially if the business is not profitable. They are also concerned about being able to sell their shares at some point in the future. All 15 shareholders plan to raise an additional $50 million in capital by selling shares in the corporation to 1,000 wealthy public shareholders. The 15 original shareholders are unwilling to give the new investors any power to control the corporation or its management. The original shareholders expect that by having 1,000 new shareholders, a public market will be created in their shares. Sketch an ownership control structure (a structure that determines how shareholders own and control the corporation through their rights as shareholders) that serves the ownership control interests of the five controlling shareholders and the 10 other shareholders. What is the best way for the five controlling shareholders to receive returns on their investment in the corporation? What is the best way for the 10 other shareholders to receive returns on their investment in the corporation?



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  • CreatedJuly 16, 2014
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