Business entity formation
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Requirements: 1100-1400
Ahmad and his friend, A.G. Pennypacker, have come up with a great idea: they have
developed a fluor elastomer liner (a rubber lining) for oil tankers. With this
innovation, they believe they can eliminate most oil spills that result from tanker
accidents. The liner is highly resistant to fluctuations in temperature as well as
physical punctures.
Ahmad wants to set up a company, but is unsure of his options and has come to you
for advice for the type of business entity formation he should select. He has the
following concerns:
1. He does not want his other business concerns being held liable should there be
a lawsuit arising from use/sale of this product.
2. He wants an entity form that will minimize his tax liability.
Based on the entity forms detailed in Chapter 35, select one you feel satisfies his
concerns. Make sure to explain why it is the best for Ahmad and Pennypacker.
Action Items
1. Read the case study above.
2. By the due date, submit your answers to the case study questions. Justify your
Answer previewLLCs are generally perceived as a hybrid form of a business entity. This is because they combine the attributes of a corporation and a partnership (Mancuso, 2021). Specifically, an LLC combines the federal tax classification generally associated with a partnership and the liability shield associated with corporations. In the United States, LLCs are regulated by the rules established by individual states where the LLC was incorporated, irrespective of where the entity undertakes its businesses (Mancuso, 2021). This is an added advantage for Ahmad and A.G. Pennypacker, considering the elastomer liner they invented will be used and sold in different parts of the world. The best state to set up an LLC in the United States should be Wyoming due to its tax-friendly nature. In addition, should Ahmad and A.G. Pennypacker decide to incorporate their LLC in Wyoming, its formation and operations will be regulated by the Chapter 29 – Wyoming Limited Liability Company Act. Limited liability companies have a couple of attributes that set them apart from other business entities.[1292 Words]
Business entity formation
