At a meeting with Andrew and Olivia, you asked the entrepreneurs some questions to help you recommend

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Question:

At a meeting with Andrew and Olivia, you asked the entrepreneurs some questions to help you recommend a specific legal form for their business. Your notes from the meeting are below.

They have decided on the name "General Germ."

Olivia has significant wealth and wants to make sure her personal assets are protected. Andrew does not have significant wealth.

Olivia has a high income from her job and her other investments. Andrew is getting ready to quit his job to focus full time on their new venture. Clients imagine they will have to give equity as incentives when they recruit workers.

Andrew has a friend who is a venture capitalist and Andrew believes the company will be able to secure VC financing within six months. He has not yet met formally with anyone from this VC firm.

Olivia will contribute more capital to the business (including cash and her invention) than Andrew, and as such Olivia will have voting control. Andrew has agreed to this arrangement but wants veto power over significant decisions.

Other than paying themselves modest salaries, clients expect to reinvest all profits back in the business for the first two years after launch.

Clients expect to have an IPO within five years (remember to tell them later that it is unlikely in this market).

They anticipate putting equal time into the business, and want their equity to vest

on a "typical" schedule.

They claim that filing fees associated with forming the business are irrelevant.

1. Draft an email to your client giving a recommendation as to what type of entity they should form for their new business, and the jurisdiction in which the entity should be organized. Be sure to explain, with language appropriate to this client, the reasons behind your recommendation.

2. Prepare the organizing document to be filed with the Secretary of State to organize the entity you are recommending. Do not prepare the founders' agreement at this time - just the organizing document that is filed with the Secretary of State.