Sam, Alfredo, and Juan want to start a small U.S. business. Juan will fund the v

Question

Sam, Alfredo, and Juan want to start a small U.S. business. Juan will fund the venture but wants to limit his liability to his initial investment and has no interest in the daily operations. Sam will contribute his full efforts on a daily basis but has limited funds to invest in the business. Alfredo will be involved as an active consultant and manager and will also contribute funds. Sam and Alfredo are willing to accept liability for the firm's debts as they feel they have nothing to lose by doing so. All three individuals will share in the firm's profits and wish to keep the initial organizational costs of the business to a minimum. Which form of business entity should these individuals adopt?

Explanation / Answer

Sam, Alfredo, and Juan wants to start a business in Partnership with the idea of profit sharing, however, Juan wants to act as Limited Partner and Sam & Alfredo want to act as General Partners. Therefore, these individuals should adopt "Limited Partnership" form of business entity.

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