CASE 7.1 Preparing a Proper Legal Foundation: A Start-Up Fable Group nu 2 Valerie- MA1N0220 David- MA1N0219 Bảo Bảo- MA1N0230 Amos- MA0N0241
Feb 25, 2016
CASE 7 .1
Preparing a Proper Legal Foundation: A Start-Up
Fable
Group nu 2Valerie- MA1N0220David- MA1N0219Bảo Bảo- MA1N0230Amos- MA0N0241
Introduction to the case (1/3)
Jack and Sarah: Start-up a business called iUser Accessories (to be revised by trademark attorney before any advertisement)
to sell accessories for Apple iPods and iPhones 10 kiosks in malls and high-traffic areas Website
Value-added promotions: Series of short videos (helps to make better use of iPods and iPhones) Customers will be provided code to access videos from
the web
Introduction to the case (2/3)
Jack and Sarah: 1st place in university-wide business plan competition 7500 USD in cash and 7500 USD in-kind services
Completed feasibility analysisConcept statement
Distributed to 16 people incl professors, electronic store owners, users, parents of young users positive response
After concept statement: market survey
Introduction to the case (3/3)
Start-up capital (1 and 3 year pro forma financial statement)business is viable
66000 USD fundingAccording to projection: cash flow possitive after 4
months, no need for additional fundingProjections:
32 000 USD salary / year /both 3 000 USD personal contribution of each 60 000 USD friends and familly
Meeting with attorney They prepared list of issues with their recommendations Emailed the list to attorney 1 week prior the meeting
Q1: complete Jack and Sarah‘s list for them, incl the issues you think they will place on the list along with their
recommendations
Issue Jack and Sarah‘s recommendation
Legal form of the business Business ownership – types – A. Start-up business, B. Self Employed&Independent contractor
Small business Administration EIN – Employer Identific.Nu. – process,where to register, requested papers
Taxation Self Employed Tax, Social Security Tax, Medicare TaxStructure in percentage, depreciation, accounting duty
Liabilities The kind of liabilities , garaties and limitation
Financial Financial report orders
Agreements Type of the legal form of agreementshttp://www.sba.gov/content/startups-high-growth-businesses
Q1: Which of the issues will stimulate the most discussion with the attorney, and which issues do you think will stimulate the
least?
In the discussion they must open the questions concernig of the ownership form and taxation differencies to find the most suitable solution
They must find out what are the most offen problems of start-up comp., which other order and law issue they must expect
Question about the accounting, liabilities, financial reporting, guarantees and agreements
IPR – intelectual property concerning of the web pages show them the possible combination of the Face to Face selling, E-commerce opportunities and Services as a form of the business
http://www.sba.gov/content/self-employed-independent-contractors
Q2: Make a list of the things you think Jack and Sarah did right in preparing for their meeting with the attorney.
asked for the reference of the right and good attorney
research regarding the legal issues that they might discuss to understand it better
asked for an advice of experiences businessman (father of Sarah) regarding the meeting with an attorney
created the list of issues together with recommendations they emailed the list of issues 1 week in advance to attorney
in order to allow attorney to prepare well and to lead the discussion efficiently
Q3: Comment on the product feasibility analysis that Jack & Sarah completed. Do you think the way Jack and Sarah approached this task was appropriate and sufficient?
PRODUCT FEASIBILITY ANALYSIS
Developed a concept statement and feasibility study then distributed it to a total of 16 peoples.
Responses received: PositiveDistribution of videos: EducativeIdea: To use iPod and iPhones betterSurveyed 410 people in a more conventional manner.
Median Age of Target Market: 20 years oldProcess of Distribution: Approaches their target market,
then ask them to complete the survey.Survey design: Large Population52% of the target market own an iPod and iPhone.the way Jack and Sarah approached this task was
appropriate and sufficientbecause participants are very interested in their
feasibility analysis.
QUESTION 4 (a)
What advantages do Jack and Sarah have starting iUser Accessories together, rather than one of them starting it as a sole entrepreneur?
Sole Proprietorship vs Partnership
Disadvantages of a Sole Proprietorship
The business relies on the skills and abilities of a single owner to be successful
Raising capital can be difficult.
Business losses can be deducted against the sole proprietor’s other sources of income
The business ends at the owner’s death or loss of interest in the business.
Advantages of Partnership
Sarah and Jack pooled their skills, abilities, and resources to run a business
Having more than one owner made it easier to raise funds.
Business losses can be deducted against the partners’ other sources of income.
The business ends with the death or withdrawal of one partner unless otherwise stated in the partnership agreement
QUESTION 4 (b)
What challenges do you think Sarah and Jack will have keeping their partnership together?
Liability on the part of each general partner is unlimited. Because the business relies on the skills and abilities of
a fixed number of partners, hiring employees who have additional skills and abilities could be expensive.
Raising capital can be difficult. Because decision making among the partners is shared,
disagreements can occur. Loss of interest to work with each other Family and friends intrusion The business ends with the death or withdrawal of one
partner unless otherwise stated in the partnership agreement.