About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline

64 U. Kan. L. Rev. 573 (2015-2016)
A Rational Approach to Business Entity Choice

handle is hein.journals/ukalr64 and id is 621 raw text is: 








A Rational Approach to Business Entity Choice

Eric H. Franklin*

    Whatever happened to 'Hey, I have some apples, would you like to
    buy them?' 'Yes, thank you! ' That's as complicated as it should be to
    open a business in this country.

    - Ron Swanson'

I. INTRODUCTION

    Imagine an inventor. She has a prototype that is testing well in a
wide-open market. She would like to start modestly, with a small team.
Eventually, she will scale-up and expand geographically, but she would
like to test her product before investing too much time and money. She
has a detailed business plan and the promise of some seed funding, but
she will need much more capital to bring her operations to a national
scale.
    Our inventor has no shortage of entrepreneurial spirit, but she
unfortunately lacks both legal and tax training. Her uncle tells her that
she should form a limited liability company (LLC). He owns a sandwich
shop, and he formed an LLC when he started. But our inventor is not
sure what, precisely, an LLC is. She knows that contestants on Shark
Tank are expected to form    either an LLC or a corporation,2 but she does
not know the difference between the two entities. Regardless of the legal
benefits gained by establishing a legal entity (whatever they may be), she
is keen to take advantage of the immediate legitimacy inherent in adding
Inc. or LLC to her business cards. But what legal form protects her


* Associate Professor of Law and Director of the Small Business and Nonprofit Legal Clinic,
William S. Boyd School of Law, University of Nevada, Las Vegas. The author would like to thank
Patience Crowder, Jeff Stempel, Elizabeth MacDowell, Mary LaFrance, and Jeanne Price for their
comments. The author would also like to thank the participants of the 2015 Clinical Law Review
Writers' Workshop. Excellent research assistance was provided by Vincent Kwan, Ani Biesiada,
Samantha Rice, Reginald Thomas, and Carlos Morales. Finally, the author would like to thank
Andrew Martineau for his tireless and superb research support in compiling the Appendix.
    1. Parks and Recreation: Emergency Response (NBC television broadcast Feb. 14, 2013).
    2. Shark Tank is a reality television show in which entrepreneurs pitch their ideas to potential
funders. See 'Shark Tank Initial Application Packet, ABC.CoM, http://cdn.media.abc.go.com/m/
pdf/shows/shark-tank/ST Initial Application Packet.pdf (last visited Feb. 16, 2016).

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline.

Contact us for annual subscription options:

Already a HeinOnline Subscriber?

profiles profiles most