Review instructions for Business Planning #3. Develop and draft brief letter (to be sent to Abigail) addressing her concerns and questions.

Business Planning #3

All the shareholder derivative lawsuits were settled, as eventually, Fantastically Innovative Surfing, Inc. was sold to a third buyer for $40 per share; the shareholders unanimously agreed to the sale of the corporation to the third buyer. After the sale, Abigail, Bianca, Charles, Ernest, Fernanda, and Grant went their separate ways.

Three years after the sale, Fernanda approached Abigail with the prospect of starting up a new company that would sell clothing apparel - focusing specifically on multi-colored shorts and socks - to skaters and surfers. Fernanda had taken up art in the years since the acquisition and had become a skilled graphic artist, and she proposed that she would design all the apparel, while Abigail would manage the business, with Abigail putting up all the financial capital for the business. Abigail is very interested in this business proposal. Fernanda thinks that the business should be a closely held corporation, but she is not sure that is the best choice of business organization and would like Abigail's advice.

Abigail has come to you with the following questions. Your responses to each of the following questions should be approximately one to two paragraphs. Present your best or most persuasive arguments or suggestions. You should substantiate your responses by providing any appropriate references to the cases, statutes and model statutes that we are studying in our course; no outside references are required. You may feel free to incorporate additional facts and assumptions into the hypothetical scenario, as long as you clearly note them.

1. How do you think Abigail and Fernanda should divide up the ownership shares of a closely held corporation - that is, what factors should each of them consider in deciding who owns what percentage of the shares of the corporation? If they do not choose to divide the shares evenly, what rights do you think the minority shareholder would have in this situation?

2. Abigail is also weighing whether the company should be a limited partnership or a limited liability partnership. What factors should she consider in figuring out whether either of these types of business organizations may be appropriate entities for her and Fernanda's new business venture?

3. Similarly, Abigail is also considering that the company perhaps should be formed as a limited liability company. What factors should she consider here with respect to determining whether the limited liability company may be an appropriate entity for her and Fernanda's new business venture?

4. Abigail has recently learned about the for-profit benefit corporation and is intrigued by this possibility as well. What are the steps to forming a for-profit benefit corporation? What do you think would be the primary advantages and disadvantages of doing so? Regardless of whether the company becomes a for-profit benefit corporation, what do you think is one important step that it should take to help ensure that its employees act ethically, and why?

5. Which type of business organization do you think Abigail and Fernanda should ultimately choose, and why? What are the key tax advantages and disadvantages from choosing that entity?

Prepare a letter (to be sent to Abigail) addressing her concerns and questions. In your letter, clearly identify the recommendations being made and the reasons supporting the recommendations.