Case Study

Ahmad and his friend, A.G. Pennypacker, have come up with a great idea: they have developed a fluoroelastomer 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.

Review Chapter 35 and ask yourself which form of business organization best fits Ahmad’s concerns which are that he doesn’t want to subject his other businesses to liability if a lawsuit was filed against the company and he wants to pay the least amount of taxes.

      Which business formation would result in the least liability if the business is sued?  Sole proprietorship, general or limited partnership, or corporation?