Capitalizing or Funding a New Business

The video tutorial explains the process of capitalizing a business, starting with the formation and funding of business entities. It covers the use of subscription letters and agreements for exchanging ownership interests, the importance of vesting periods and tax planning, and the regulatory compliance required by the SEC. Additionally, it discusses stock options and buy-sell agreements as part of the capitalization strategy.

What is the primary purpose of capitalization in a business entity?

• To avoid paying taxes

• To fund the business for operation

• To reduce the number of shareholders

• To increase the company's debt

What document typically initiates the process of exchanging value for ownership interest?

• Subscription Letter

• Service Agreement

• Buy-Sell Agreement

• Stock Certificate

Why is it important to make a tax election when receiving an ownership interest that vests over time?

• To avoid legal issues

• To reduce future tax obligations

• To ensure immediate ownership

• To increase the value of the interest

What is the role of the Securities and Exchange Commission in the sale of ownership interests?

• To determine the value of shares

• To provide loans to businesses

• To regulate and oversee the sale

• To approve all business transactions

What is a stock option plan used for in a business?

• To reduce the number of shareholders

• To immediately issue ownership interests

• To allow future purchase of ownership interests

• To increase the company's debt

What is the purpose of a buy-sell agreement in a business?

• To immediately transfer ownership interests

• To control who can own an ownership interest

• To reduce the company's tax obligations

• To increase the company's stock value

What must be filed within 15 days of selling an ownership interest to perfect an exemption from registration?

• Form C

• Form A

• Form B

• Form D