You are considering going into business with your friends John, Ellen, and Veronica. The business will be buying residential homes, updating and remodeling them, and then reselling them for a profit. It will be a corporation that will be owned equally by all 4 of you. You are investigating whether to join the venture. You know that John, Ellen, and Veronica are not the most organized business people, but John assures you he has determined that little upfront money will be required, because only a $1000 capital contribution is necessary and all of the other funds will be borrowed. He says your risk will be only for the $1,000. He has estimated that the first residential home to be bought will cost $500,000. Your concerns include: 

1) maintaining your 25% relative stock ownership, if the new venture determines to issue more stock to the shareholders, 

2) keeping the tax burden on the venture as low as possible, 

3) keeping a say in the business even though you only will own 25% and will be a minority shareholder, and 

4) making sure you can maintain your limited liability as a shareholder even though you are only putting $1,000 in the corporation. That seems too good to be true.

For items 1,2, and 3 what should you recommend that the corporation include it its articles of incorporation or in its business plan to protect against your 3 concerns.

For item 4, do you think your limited liability is adequately protected or would you recommend a different approach?

Answer rating: 100% (QA)

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