Reference no: EM13782101

You and three associates are opening a business. The four of you will provide the initial capital needs of the business ($100,000). You and your three associates will contribute an equal amount ( $25,000 each), and your plan is to manage the business together. You have decided it is best to incorporate. The corporation will issue 100 shares; the shares will be split between the four of you equally (25 shares each).

1) Explain what information must, by law, be included in your articles of incorporation. Explain what information may be included in the articles (meaning the information that is not required but that one may choose to include in the articles).

2) You and your associates decide it is best to use classes of shares rather than one class. Why is this preferable in this situation? How many classes of chares will you use? Will you tie the shares to director positions? Why and how?

3) You know that the free transferability of shares in this type of corporate situation is basically a myth. Explain why the transferability of shares may be a problem and what you will do to ensure that the four shareholders can transfer (sell) their shares if they need to in the future.

4) You are very concerned about getting a return on your $25,000 investment. Explain at least two methods your corporation can adopt to make it more likely that each of you wil get a return on your investment.

5) What is the "Wall Street rule?" To which type of corporation does it apply? What are some criticisms of the rule? Discuss at least one solution.