Organization and Financial Structure of Corporations
Organization and Financial Structure of Corporations
A client has sought your assistance before incorporating a business that will buy and sell fine art. The client will enter the business with three other associates, all about 35 years old. They plan to own equal shares of the business and to manage it together. The business has not yet been incorporated.
Your client and her associates identify five valuable paintings they want to purchase. To reduce their personal liability on the contracts to purchase the paintings, what do you recommend they do prior to signing the purchase contracts?
Your client states that she wants to incorporate the business because a corporation's shares are freely transferable, making it easy for shareholders to liquidate their investments. You know better. Explain to your client why free transferability of the shares as a legal matter is a problem for her and her associates. Also explain to your client why free transferability of the shares as a practical matter does not exist. What should your client do to address the share transferability issues?
