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CHAPTER 1
EAST COAST YACHTS
1. An LLC (limited liability company) is essentially a hybrid form of a partnership (or sole
proprietorship) and a corporation. The goal is to operate like a partnership or sole proprietorship, but
Transfer of ownership. It is easier to transfer ownership in a corporation through the sale of stock. 7)
Potential for reduced agency problems compared to a corporation.
The biggest disadvantage is the potential cost, although the cost of forming an LLC can be relatively
2. Forming a corporation has the same advantages as forming an LLC, but the costs are likely to be
higher.
3. As a small company, changing to an LLC is probably the most advantageous decision at the current
time. If the company grows, and Larissa is willing to sell equity ownership, the company can
reorganize as a corporation at a later date. Additionally, forming an LLC is likely to be less expensive
than forming a corporation.
