Are companies ever started with foreknowledge that some future event (which will happen) will mean the company will close down?
For a made-up example, say that a biotech researcher invents a pill which cures some now-incurable disease. Could he (or would he, or should he) start a company whose sole purpose is to develop, market, and sell the pill while the patent is in effect? In other words, when the patent runs out, simply dissolve the corporation and walk away with a few millions of dollars for each of most of the employees.
I’ve been wondering about this for a couple of reasons, but the first was seeing, in several recent movies, that they were made by “(insert name of movie here), Inc.” which makes me think that small corporations are being formed just to produce a single movie each. Is there some benefit to doing so for, say, Universal Studios?
I’m guessing, but I figure there are plenty of examples of companies which began as “one trick ponies,” but then branched out to do other things prior to the one thing they started selling became unmarketable or unprofitable, thus allowing the company to live on. I’m more interested in examples of companies which are (or were) formed with the intent that when their product becomes unmarketable or unprofitable - not if, but when - they’ll shut their doors, as part of their business plan.
This happens all the time, especially in the financial services industry. It may happen that in a particular transaction it is more tax-efficient to take out the proceeds as a capital payment than a distribution of profit, so a company is formed to carry out the transaction and is then dissolved when the transaction has been completed.
Sure, it’s possible. Usually it’s part of a strategy to limit liability. Some homebuilders do this. They’ll form a corporation to construct a subdivision, sell all of the houses, and distribute the proceeds to the shareholders of the corporation.
To do this distribution, all existing creditors must be paid, at least in theory. (There are some ways around this for the unscrupulous.) The main reason to fold the corporation is to avoid claims that arise in the future, such as if problems arise with the houses. (Various states’ Business Corporations Acts govern and limit this practice, but as I said, there are ways around these limitations.)
I know that some of Kevin Smith’s ViewAskew films were produced by little production companies that turned over the finished film to ViewAskew and then terminated. This is done for legal liability reasons. The company that made the movie no longer exists and is difficult to sue by someone unhappy with something done during the filming. (E.g., a small grocery store owner upset about a bunch of mashed food.) This practice is no doubt quite widespread.
In real estate, partnership groups are formed and disolved all the time. E.g., a group gets together, builds a strip mall, after 5 years they make their money back and they sell it before the cheapo roof caves in.
As to you disease example. A lot of knowledge is built up during such a process. There are probably other diseases to which it can be applied. Also, you have provably good employees for doing this sort of thing. It is unlikely for such a company to think of being limited lifetime.
True, ftg, although some companies may be formed with that as the de facto end result–i.e., one of the investors’ most promising exit strategies may be for the company to develop a promising product/service and then be bought up by a larger company. This could even be spelled out in a business plan.