Sanjay has three children and is starting a new company. He is looking down the road to a future time when his children are grown and could take over the business. Given his future wishes, what question is most important for him to consider when establishing his new business?

A-If I am more of a risk taker, what business entity suits me best?

B-How can I spend the least amount of money to form my business entity?

C-Which type of legal structure pays the lowest tax rate?

D - What is the best business entity and structure setup for continuity and transferability?

The correct answer is letter "D": What is the best business entity and structure setup for continuity and transferability?

Explanation:

If an investor is considering to start a new business and thinking about how his children will continue with the company after his or her pass away, the factors to be considered are the type of entity that could be more convenient for his children according to their interests and the transferability of the organization upon the decease of the original owner.

Types of entities refer to the structure the firm will take and the responsibility the owners will take. We could identify sole proprietorships, partnerships, Limited Liability Companies (LLCs), and corporations to mention a few.

When it comes to transferability, for instance, in sole proprietorships, partnerships, and LLCs that cannot be done upon the death of an owner. For such a case a new organization has to be born. That situation does not happen in corporations since ownership can be transferred by the purchase of stocks and the entity remains the same.