What business forms are most attractive to investors?
Investors like to minimize their risk. That generally means that a business entity that provides a liability shield is preferable. In a partnership, an investor would effectively become a partner by contributing capital and sharing in the right to manage and to receive profits. A general partner has no liability shield, while a limited partner’s liability is limited to the amount of his or her contribution. Members in a limited liability company (LLC) also enjoy a liability limitation. Only corporations provide a true liability shield and can issue stock. Stock can be issued either as voting shares (which allow shareholders some control of the company) or non-voting shares. A corporation can issue just a few shares to a small number of shareholders, including investors, or it can make a public offering to the broader market of investors.
