Review the Jack’s Waterfront video: . The final project is based on the four individuals who are in the video: Scott (the scary one), Tammer (the son), Bill, and A.J.
Your assignment: Take a time machine back to the point at which the three partners are planning on opening the restaurant. At this point you do not know that A.J. will be a disaster or that the place will wind up failing. Everyone is enthusiastic. But lawyers and knowledgeable business people understand that although we do not know exactly what problems will occur, we know the kinds of problems that might occur.
Your final assignment is to advise these three partners as they set up their business. You are not giving legal advice, you are simply using what you have learned to counsel three real people (who should of course also talk to a lawyer) to help them avoid problems and give them a greater chance of success. The following are some of the questions sophisticated business people and lawyers should ask at this early stage. Each one of our six sessions has taught you some valuable things. Put them to use in helping these guys avoid the disaster that is waiting to fall on their heads.
What should they be doing right now to protect themselves as they go about setting up their new business? (Weeks 1, 2, 3 and 6).
You’ve learned that acting before an entity is formed and being a promoter for an entity can be risky. H about minimizing the risk? They probably want limited liability protection—what do they need to do to ensure that courts do not pierce the veil of their limited liability?
What entity should they form, and where? (Weeks 3, 4, and 5)
General partnership, limited partnership, limited liability partnership, limited liability company, or what? Where would they want to register it? How difficult will it be to set it up? Are there tax implications they should think about?
What should they consider when they are putting together the capital structure of the business? (Week 4)
Scott, you recall, is putting in more money. Bill plans on spending more time in the business. Tammer is supplying his dad’s connections. They seem to want to be equal owners, but it’s possible to see that problems might arise. Is there a way to reward Scott for his extra money contribution and Bill for his extra work?
What measures should be put in place to control the organization? (Weeks 5 and 6)
Somebody has to be in charge. Which one? What mechanisms can they use to make sure that they always knew who’s in charge of what in the business?
What steps should they take to direct and reward their employees to make sure they do a good job? (Week 1)
Obviously they couldn’t predict that A.J., for example, would be a disaster, but employees sometimes turn out badly. How could they minimize that problem?
What happens if they find out they’re not getting along?
Note we have three equal owners. What happens if two of them (e.g., Bill and Tammer) decide to exclude the other (Scott) so that he is frozen out of his investment?
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