On May 7, 2019, two technology managers from a couple of leading social media companies met for dinner at a restaurant in Palo Alto, CA. These technology managers had known each other for a long time as they had played golf together in college. One of the technology managers, Jim Lawson a resident of Las Vegas, NV, was in fact a former PGA tour player who continued to play in professional golf events. He was scheduled to play in a golf tournament the following week for which he would receive $100,000 as an appearance fee because of his stature within the social media industry.

During dinner, they each shared that they were displeased with the social media industry in general and, more specifically, displeased that their respective companies did not protect users' data. The friends had each accumulated significant wealth due to stock options and possessed financial security. They discussed starting their own company, which they would name TALKER. TALKER would be based on a proprietary algorithm that would protect users' data. In their view, TALKER had the potential to grow quickly and take market share from other social media companies. They thought that data servers would be needed in the U.S., Singapore (to serve the Asian market), and the Netherlands (to serve European users). They also recognized that, as the new business grew, external financing would likely be needed to sustain the growth. The two technology managers were uncertain, however, whether their current employers would challenge their perceived use of proprietary technology or trade secrets.

The technology managers were also concerned about the ongoing U.S. Congressional hearings and inquiries into the liability protections afforded social media companies under the Communications Decency Act, 47 U.S.C. section 230 (more commonly known simply as “section 230”). Both agreed that the liability protections under section 230 would have to remain in place for the start-up business to be successful. If a social media company is deemed to be a "publisher" it can lose its liability protection. They each vowed to think about TALKER’s business procedures or operating processes to put in place to maintain the section 230 liability protections.

During dinner, and before ordering a second bottle of wine, one of the technology managers, Jim Lawson, went outside to take a phone call. Back inside the restaurant, he made his way to the restroom. In the hallway leading to the restroom, Jim slipped and fell on the wet slate tile floor. The slate tile floor had recently been mopped by one of the employees who did not place a “Caution: Wet Floor” sign in the area. This slate tile floor had recently been installed and the sheen on the new tiles had not worn off.

As a result of the fall, Jim injured his arm and cannot participate in the corporate golf outing the following week where he would’ve been paid $100,000. Jim would later incur $10,000 in medical expenses related to the fall in the restaurant.

Jim made his way back to the table with the assistance of restaurant staff to complete the discussion with his colleague. They decided that one of the next steps was to think through the legal, tax, and business considerations of a potential start-up business.

1. Form of Business

1. Discuss the forms of business that should be considered for the TALKER start-up business. In your response, discuss the legal, tax, and other business issues for each of the forms of business the founders should consider.
2. What form of business for this start-up business do you recommend on these facts?

1. The Slip and Fall
2. Where may Jim Lawson, the plaintiff, file the lawsuit related to his fall in the restaurant? Which court system?

Answer rating: 100% (QA)

Forms of Business for TALKER Startup Business 1 Sole Proprietorship A sole proprietorship is the simplest form of business and involves a single indiv... View the full answer