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What is the ownership structure of a C-Corporation?
One or more stockholders; no restrictions on owners
How is a C-Corporation formed?
Certificate/Articles of Incorporation.
What governs a C-Corporation?
Bylaws.
What is the tax structure of a C-Corporation?
Double taxation—entity level and stockholder level.
What is the liability of stockholders in a C-Corporation?
No personal liability for stockholders.
What equity types are allowed in a C-Corporation?
Common and preferred stock; multiple classes allowed.
What is the ownership structure of an S-Corporation?
1–100 stockholders; only US citizens/residents.
How is an S-Corporation formed?
Certificate/Articles of Incorporation.
What governs an S-Corporation?
Bylaws.
What is the tax structure of an S-Corporation?
Pass-through taxation.
What is the liability of stockholders in an S-Corporation?
No personal liability for stockholders.
What equity type is allowed in an S-Corporation?
Common stock only; one class allowed with varying voting rights.
What is the ownership structure of a Limited Liability Company (LLC)?
One or more members; no ownership restrictions.
How is an LLC formed?
Certificate/Articles of Formation/Organization.
What governs an LLC?
Operating Agreement.
How is an LLC taxed?
Taxed at the member level.
What is the liability of members in an LLC?
No personal liability for members.
What type of equity is allowed in an LLC?
Membership interest; customizable through the Operating Agreement.
What is the ownership structure of a Limited Partnership (LP)?
General partners (GPs) and limited partners (LPs).
How is an LP formed?
Certificate/Articles of Limited Partnership
What governs an LP?
LP Agreement.
How is an LP taxed?
Taxed at the partner level.
What is the liability of partners in an LP?
GPs have full liability; LPs have limited liability.
How can corporations limit personal liability?
By adhering to corporate formalities like appointing officers, holding annual meetings, and keeping accurate minutes.
What are examples of intellectual property (IP)?
Formulas, logos, patents.
How can businesses protect their intellectual property?
Use proper license agreements to grant or gain access to IP.
What are examples of proper contracts for a business?
NDAs, supply/vendor agreements, IT and SaaS contracts.
Why is industry licensing important?
It is essential for regulated industries (e.g., healthcare, food) to comply with federal, state, and local regulations.
What are key considerations in franchising?
Understanding franchisor vs. franchisee roles, pros/cons, and adherence to franchising agreements.
What are examples of funding options classified as "Debt"?
Bank loans, SBA loans, personal funds.
What are examples of funding options classified as "Equity"?
Investors gain ownership interest in exchange for investment.
What are alternatives to traditional debt and equity funding?
Factoring, crowdfunding, grants.
What are the three key debt types?
Loans (fixed amount upfront), lines of credit (revolving debt for short-term needs), and factoring (selling invoices for immediate cash).
What is the formula for Enterprise Value (EV)?
EV = Equity + Debt - Cash.
What is the difference between pre-money and post-money valuation?
Pre-money valuation is the company’s equity worth before funding, while post-money valuation is equity worth after funding.
What is the formula for Weighted Average Cost of Capital (WACC)?
WACC = (Debt Proportion × Cost of Debt) + (Equity Proportion × Cost of Equity).
What is the after-tax formula for Cost of Debt?
Interest Expense ÷ Total Debt × (1 − Tax Rate).
What does the Cost of Equity measure, and how is it calculated using CAPM?
Measures the return expected by equity investors; CAPM formula: Cost of Equity = Risk-Free Rate + β × (Market Return Rate − Risk-Free Rate).
What is the significance of understanding the Cost of Capital?
It represents the expected return required by providers of capital and is used to evaluate project returns.
What is the formula for the simplified cost of debt?
Cost of Debt=(Total Debt/Total Interest)×(1−Tax Rate)
How do you calculate the detailed cost of debt?
Cost of Debt=(Risk-free Rate+Risk Spread)×(1−Tax Rate)
What is the formula for the cost of equity?
Cost of Equity=Risk-free Rate+β×(Market Return Rate−Risk-free Rate)
hat is the formula for WACC?
WACC=(% of Debt×Cost of Debt)+(% of Equity×Cost of Equity)
How do you calculate NPV?
Net Present Value=−Initial Investment+∑Discounted Cash Flows
What is IRR?
IRR is the discount rate at which the NPV equals zero, reflecting the profitability of a project.
