One of your clients is a plastic surgeon who is planning to enter into business with four other plastic surgeons.  Together, the net income for the practice is projected to be $20 million. The taxable income is estimated to be about one half of this amount, and they do not plan to pay any dividends for the first five years. Each surgeon will be paid $100,000 per year.  

 

Required: 

1. Critically discuss the various entity types, and suggest what entity choice maybe most appropriate for these surgeons.     
2. Discuss what problems may arise from the proposed compensation plans, and suggest how they maybe remedied.       

Question 

A computer software company is highly profitable, and Microsoft has indicated it would like to acquire the firm.  Management has no intention of selling.  The firm's 1 million shares (400,000 of which are owned by management) are trading for $120, and Microsoft has indicated it will tender $130 to shareholders.

Required: 

1. Compare and contrast 5 methods of financing the continuing operations of an enterprise.
2. Critically discuss any forms of financing that maybe used by management to fight off this hostile takeover, outlining the tax implications.