A wealthy taxpayer is planning to start an Internet based business. The taxpayer expects to generate tax losses for at least the first 5 years of the business. The taxpayer also hopes to cash out of the business within 10 years by either going public or selling to another business. Discuss the pros and cons of starting out as a regular C corporation versus a sole proprietorship (or some other pass through entity). In your discussion, indicate whether it matters that the investor:
a. Cashes out via going public or by selling to another business.
b. Is actively involved in the operations of the business. How might your answers to parts (a) and (b) differ if the investor were not so wealthy?