Steve plans to open a business, and he will immediately be hiring Susan and Rick ashis two employees. Steve will also be providing a significant amount of time at the shopsince it will be his full-time job to make this business succeed.

Steve will onlybe investing his own moneyinitially anddoes not expect to make anyprofit for at least two years. As a result, he would like to keep hisstartupcosts as low aspossible. Although Steve is confident that the business will work, there is always the

risk that it will not generate enough initial revenue to stay in business long enough toreach profitability.

If the business performs as anticipated, it should be profitable by year three, and byyear four they would look to open a second location. At the time of expansion, it is likelythat Steve will be required to obtain additional financing, although at this point he isunsure if it will be debt or equity financing.

Depending on how they perform as employees, Steve is open to the possibility ofprovidingsome sort of incentive for Susan and Rick. It may be in the form of anemployee bonus program, but Steve is also open to the possibility of some sort ofownership-provided that he can limit the rights that they have and make sure that if theyleave employment he can get the ownership back.

With regards to the form of business for Steve, please answer the following questions:

1. Why should it be a sole proprietorship?

2. Why shouldn't it be a sole proprietorship?

3. Why should it be an LLC?

4. Why shouldn't it be an LLC?

5. Why should it be a corporation?

6. Why shouldn't it be a corporation?

7. What do you recommend and why?