When an entrepreneur launches a new venture-like Harvard sophomore Mark Zuckerberg did when he invented "thefacebook" during the 2003-2004 academic year-he must also figure out what type of legal structure the business will have. Specifically, will the new business be run as a sole proprietorship, a general or limited partnership, a limited liability company, or a corporation? As it happens, Facebook's early company history, which is dramatically depicted in the Academy Award-winning movie The Social Network, provides a memorable illustration of many of these various legal structures. Today, Facebook is a publicly held corporation, with its shares listed and traded on the NASDAQ stock exchange. However, years before Facebook became a major corporation, it started as a sole proprietorship in Mark Zuckerberg's college dorm room. a general partnership when Zuckerberg and Saverin became business partners. In exchange for Saverin's financial support, the two partners agreed to split their respective ownership interests 70-30-with Zuckerberg obtaining a 70 percent stake in the new company and Saverin receiving a 30 percent interest.8 Zuckerberg then launched The Facebook (as it was then called) from his dorm room on February 4, 2004, and his website became an instant success.9 Facebook soon spread to other campuses: Columbia (February 25), Stanford (February 26), and Yale (February 29).10 By April 2004, Zuckerberg and Saverin-and a third founder, Dustin Moskovitz, who grew up in Ocala, Florida, before going to Harvard- decided to formally register Facebook as a "limited liability company" in the state of Florida. The rest, as they say, is history. . . .

CRITICAL THINKING QUESTION 

Facebook was launched in February 2004. From a legal perspective, the company first began as a sole proprietorship and then morphed into a general partnership before becoming a limited liability company in April 2004. Why do you think the founders of Facebook decided to structure their company as an LLC so early in the company's history?