Checkpoint: Business Organization
Two friends, Joe and Bob, decided that as they both loved beer they wanted to open a Brew Pub. However, they needed to raise capital to finance the purchase of the equipment for operating a brewery. Joe and Bob decided the best way to raise the capital necessary was to offer stock in their new business but they did not know how to set up a company. Joe and Bob hired an attorney that specialized in setting up organizations to talk about the best way to set up the company and raise the capital. The attorney discussed the various options such as offering joint stock. The investors would purchase stock certificates, which guaranteed the investor a percentage of the profits. However, the downside would be that if the company folded the investors could be sued by creditors. Joe and Bob agreed it was unlikely they would find any investors willing to invest using this method. The second option the attorney offered was creating Limited Liability Company. Investors would still purchase stock for a percentage of the profits, but they could not be sued by creditors if the company folded. The third option would be to create a Partnership where a group of professionals would agree to pool their resources in exchange for being the only stockholders. The last option was a Sole Proprietorship where the company would be owned by one individual. Joe and Bob were planning to own and run the business, so this was not a viable option. Joe and Bob decided the best option for creating a company and raising capital would be a Limited Liability Company. They were successful in raising the capital and the brew pub is a popular spot in