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Five friends have gotten together to form home building business. Two of friends have sizeable assets, but little construction experience. These two also have some experience in running companies. Other three friends have small amount of capital to invest. Their main contribution to group is that all three formerly worked for very successful homebuilders, and one individual headed local division of national homebuilder for past two years.

Even with their combined savings, group realizes that they will require to either obtain bank financing or outside investors. Bank financing will need that five friends put up their personal assets as collateral. Outside investors will not demand personal collateral, but will demand control. Five friends think that company will be success. Yet, even without having to give bank personal collateral, they are concerned that if business fails, they could lose everything they have accumulated.

What kind of business entity must friends form to create homes? Let whether more than one company must be formed if you think that other ancillary businesses must be set up at same time.


Business Management, Management Studies

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