Business Law Memo
M E M O R A N D U M TO:Client FROM: DATE:November 16, 2011 RE:Suggestive Business Entity for Cure of Cancer Question Presented What business entity would be best suited in order to create the enterprise for the client’s scientific cure of cancer, while keeping his main interests in mind: to get assistance in running the business portion of the enterprise, while limiting his personal liability; and providing investors with the most profit possible while limiting the scope of the amount of how many people that will eventually be involved?
Brief Answer A C Corporation will likely suit the needs of the clients’ interest in creating his business enterprise of creating the cure for cancer.Facts Based on the information provided by the client, he wants to manage the scientific aspect of the business and hire business professionals to run the enterprise and raise additional funds.In addition, he wants to limit his liability in the enterprise and wants to limit the scope of how many investors would be involved.
Based on my interpretation of the clients’ interest, he wants to hire another business professional to handle the business side. Because of this, C Corporation would be most beneficial. If the client brought on his main investors as limited partners and then they ended up making significant management decisions while he developed the science, they would be treated as general partners for liability reasons. Also, the client did not say exactly that he did not want investors to be liable, only limit the scope of how many people would be involved, he did say that he wanted to limit his personal liability.
Therefore, C Corporation would be most beneficial because the client and his investors would have limited liability. In the alternative, an LLC could be a possibility if the client wanted to take part in running the business aspect of the enterprise, then this would be the best. The client and the business professional that is hired would be partners running the business aspects of the enterprise. The client would also be responsible for science aspect of the enterprise.
The investor he brought on would become limited partners who would only contribute assets and would not participate in the management of the business. Therefore this would keep their personal assets protected from the business just in case the company fails. Although this would protect the investors it would leave the client completely liable for any wrongful actions the investors make can. If the client did not want the investors to be held liable at all then in fact, a Limited Partnership would be best because the client would become the general partner.
Therefore, he would be the one to run the business aspect of the enterprise. On top of running the enterprise he would also be in charge of the science aspect of the enterprise also. The investors he has now and in the future would become limited partners who would only contribute assets and would not participate in the management of the business. This would keep their personal assets protected from the business just in case the company fails. Although this would protect the investors it would leave the client completely liable for the partnership debt.
It would also leave the client responsible for the business aspect of the company which he previously stated he was not interested in handling. “We could get around this by suggesting they develop a LLP as the general partner. ”(Loafman, lecture) Conclusion Although, Limited Liability Company and Limited Partnership have positive aspects, C Corporation would still be most beneficial to our client because he just wants to be the scientist and does not want to be the one to manage the business. He wants to hire some business professional to run the enterprise and limit his liability.