Homer, single & Marge, married with one child, are starting a business to provide computer consulting services, web design and software development. They will locate in Los Angeles, California. Homer is willing to contribute $50,000 to the business. Unfortunately, Marge has no money to contribute, but has the computer expertise, the essential contacts and is a graduate of the UCLA Anderson School. In fact, Marge already has two potential new clients, one located in Arizona. They hope to open a second office in Arizona within a few years. They would like to participate equally in making all decisions. They estimate that $100,000 will be enough money to pay all expenses for 12 months at which time they project that revenues will cover expenses. Homer and Marge plan on reinvesting most of the earnings with the goal of expanding and selling the business. They have decided on the name Virtual Construction, Inc., but will be doing business as “Vircon.”

Assuming a few friends of Marge’s, (Sven, Harry and Steven) feel the business will be very successful and would like to invest. Sven lives in and is a citizen of Sweden. He only visits the United States once or twice a year. They are all content to be passive investors.

• 
  

A) What form of legal entity do you recommend if only Homer and Marge decide to participate in this business venture and why?

B) What form of legal structure do you recommend if Homer, Marge, Sven, Steven and Harry participate, and why?

Answer rating: 100% (QA)

A If only Homer and Marge are participating a Limited Liability Company ... View the full answer