client letter

Topics: Finance, Debt, Tax Pages: 2 (527 words) Published: March 17, 2014
8893 Draymore Blacklick,
Ohio 43004 USA
January 19, 2014
Dear Sir,
AN OPINION ON THE MOST ADVANTAGEOUS CAPITAL FINANCING
We thank your highness for having confidence in us and as such requesting a business advice from us at this moment. We would like to have a brief discussion with you on some two pertinent issues that might help you make a viable decision towards the growth of your business and avoiding too much tax liabilities. Although businesses have a lot of means of raising funds to expand their businesses yet the most prevailing is by floating shares of stock to the general public. A company is responsible to paying dividend on share it sells to the real owners of the business as well as income taxes of capital revenues. However, it is clear that any time a company raises capital by taking on a debt; that company can write such debt payments off of its income taxes. We should understand that the tax advantages of debt capital or financing in this case is the primary reason why it is better for viable business-company to raise fund or capital by debt instead of by equity financing. According to Miller (1977), equity financing is more advantageous because repayment is flexible and as compare to the debt. Bailey (1969) also argued that equity financing is advantageous because businesses always have money in hand for possible business expansion and there are some tax credits for corporations. In my opinion, I will recommend debt financing for the client to consider because the interest payable on debt financing can be waived-written off. The fact is that, interest payments on debts tax returns are deductible.

In the first step, you have to try as much as possible to find out the relevant issue that could help solve the problem of the client. Here, you can find out the principles the client uses to operate his work. In the second step, you have to identify the primary issue at stake. This can be done in a question form. Here, you can ask a question...
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