Three former employees of ChipeX, Inc., Peter, Paul, and Mary, have
developed a prototype for a new microchip to power the next
generation of personal computers. They have assurances from
venture capitalists that they will receive whatever financing is needed
to manufacture the chip, provided they take 51% of the ownership
interest. The venture capitalists do not want to interfere in the
business operations and have agreed to allow the developers to
control the operations, provided certain financial objectives are
achieved. They expect to begin manufacturing of the chip within two
years. Based on outside evaluations, the chip should be a success.
The expectation is that the new venture will go public, or be sold to
investors, within five years.
Identify legal and regulatory issues to be considered in
creating/modifying this business.
What legal entity choice would you make for this business and why?