0 This paper investigates how a multiproject firm's choice of organization structure affects its value. We develop a framework in which agency and corporate tax considerations simultaneously influence investment incentives, then evaluate how an entrepreneur would optimally organize the operation of two positive-NPV, risky investment projects which share no scope economies. In order to finance these projects at their optimal levels, the entrepreneur must sell "outside" debt or equity claims. The entrepreneur must also choose between two alternative forms of corporate organization: separate incorporation1 or the joint incorporation of both projects within a single firm. Under separate incorporation (SI), each project is operated by a distinct firm, whose shareholders and bondholders have claims only on one project's cash flows. In addition, each firm pays corporate taxes according to the returns on its own investment project. By contrast, when both projects are jointly incorporated (JI) into a single firm, security holders receive payoffs from the sum of the projects' cash flows, and corporate taxes are based on the sum of the projects' profits. In choosing the type of outside claim to issue, debt has obvious tax advantages because its interest payments are made from pre-tax corporate earnings. However, when the entrepreneur's investment decisions are not contractible, debt also imposes agency costs in the form of underinvestment (Myers [21]) and/or asset substitution (Jensen and Meckling [14], Galai and Masulis [6], Green [9]) incentives. In efficient security markets, outside claimants will rationally price these deadweight costs, which therefore fall entirely on the firm's organizers. A prominent view of corporate capital structure is that the firm balances the agency costs of debt against its tax advantages. This paper's principal intended contribution is to demonstrate that the agency costs of debt financing are also importantly influenced by the firm's method of incorporation. Consequently, the firm must simultaneously se-