Abe is an entrepreneur who likes to be actively involved in his business venture

Question

Abe is an entrepreneur who likes to be actively involved in his business ventures. He is going to invest $500,000 in a business that he projects will produce a tax loss of approximately $100,000 per year in the short run. However, once consumers become aware of the new product being sold by the business and the quality of the service it provides, he is confident the business will generate a profit of at least $125,000 per year. Abe has substantial other income (from both business ventures and investment activities) each year. Advise Abe on the business form he should select for the short run. He will be the sole owner.

Explanation / Answer

Abe as an Entrepreneur would like to start a business he can opt for a corporation form of business structure because as he is expecting degree of losses in the coming years he may get deduction of the losses and expenses and avail various facilities provided by government to set up a business. another advantage would be that it in future he shall need funds, he can easily avail the fund as corporation form of business strutcure is reliable and can easily raise funds from market and financial institutions. venture capital is the form of business financing where funds are provided by venture capitalist and entire management is controlled by the entrepreneur so in venture financing the venture capitalist will get only interest in profits of the company not in ownership and control of business so corporation form of business would be a good choice

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