Client Letter

Assignment 1: Client Letter

Sharonda Sykes

Strayer University- ACC 565

Organizational Tax Research and Planning

July 10, 2015

James Wright

Sykes Accounting Services

8233 Jack Burd Lane

Suite 100

Richmond, Virginia 23294

July 10, 2015

John Smith, Chief Executive Officer

HealthCare Technologies

1100 Main Street

Richmond, Virginia 23294

Dear Mr. Smith:

Congratulations on your new formed corporation, HealthCare Technologies, and your ability to secure several significant contracts with sufficient capital. It was a pleasure to meet you and learn about the great new things your company will bring to the medical profession. The technology you have developed is truly ahead of its time and a true asset to ensure compliance with the Health Insurance Portability and Accountability Act (HIPAA).

In references to our conversation on July 6, you asked me to research the advantages and disadvantages of debt for capital formation of a corporation. While an argument can easily be made of the advantages of both debt capital and equity financing, my professional research suggest debt capital financing provides the most beneficial capital structure for your new corporation.

In reaching this conclusion, research was performed on both debt and equity capital structures. The task at hand was determining a source to feed in capital while still balancing risk and costs for tor HealthCare Technologies.

The facts as I understand them are as follows: The two most common sources of capital structure for a new corporation are debt financing and equity financing. Debt financing means borrowing from investors or lenders. The firm raises capital by selling bonds, bills, or notes to investors. Thus, in return for lending the firm money, the investors become creditors and receive promise of being repaid the principle plus interest. On the other hand, equity financing entails the firm issuing shares of its stock and receives money in return. Accordingly, the firm’s...