You: Gary and Roza, it's great to be working with you. I think we make a great team based on our skill sets. Let me tell you more about the new product and how it will be invaluable to the solar energy industry. It's a solar energy-fueled charger that charges a variety of products on the go, including cell phones and other electronic devices. We need to come up with a name for it.

I showed you the prototype last month. It's just about ready to roll, but now I just need some time to work the kinks out. I project that it will take approximately two years to develop this prototype for large-scale distribution, but once the product is on the market, there is excellent growth potential. Think of how much money people could save on electricity by using this product to recharge their cell phones and other electronics.

However, you know that my skills are in engineering, and you probably know that finance, marketing, and politics are not my strong suits. Also, I have to admit that I'm not very interested in the day-to-day business operations of the company. I'd rather spend most of my time inventing new products and would like to focus on research and development.

Roza: I think this is a great product and loved seeing the prototype in action last month, but we're going to need additional investors and expertise to get this business off the ground. We should develop a business plan that will be attractive to potential investors and partners. They're going to have concerns about joining a new startup. We should work to address these from the start. My background in marketing could help with this, and I also have some experience in new business formation. First, we need to choose the right legal form of business. We also need to develop our mission statement and structure our organization to serve that mission. What do you think are the main priorities of our new enterprise?

You: Last time we discussed this we identified innovation, sustainability, and timely customer service as our top priorities. I think these are spot on.

Gary: We need to think about how we will bring in the additional skills we need to be successful. I have decades of experience managing sales in cutting-edge technology companies. Roza has a background in marketing, and you are our research and development idea person. We definitely will need someone with finance skills, and we'll need to hire staff to handle product development, production, finance, accounting, marketing, sales, and human resources. We should organize our business with this in mind. My colleague, Katie Bourne, has expressed interest in working with us, but she would need an upper five-figure salary and benefits to entice her to leave her current position. She does not want to be an owner given her desire for work-life balance, but she would consider joining us as an employee.

We also need a visionary CEO. Ideally, a person with connections and experience in the solar industry. Since our last conversation, I spoke to Elijah Hecal, a forward-thinking figure in the solar energy field, who is known for being a rainmaker. Hecal has expressed some interest, but it will take significant incentives to get him on board. He will want to see the potential to make a lot of money. I know some companies use stock options to retain executives; perhaps we should look into that possibility.

We also need to think about raising some start-up capital. I have about $100,000 I can invest in this company. How about you guys?

Roza: Unfortunately, at this time, I don't have much money to invest. But I do have some connections with a wealthy potential investor, Carmen Palombo. I've already talked with her, and she thinks our product has a lot of promise. Carmen would like to play an active role in running the business and could invest approximately $500,000 up front. However, she would want to join the three of us as founders of the company. She was very firm about requiring an ownership stake as well as some protection for her own very considerable personal assets. I've told Carmen about our plan to start locally, go national within a few years, and then international. She seems very interested. I suggest we plan a dinner with the four of us in the near future. I'll check for available dates with Carmen and circle back to you.

Gary: Great idea, Roza. Let's definitely plan that dinner. We've talked about this before, and none of us mind sharing ownership if Carmen is willing to put that kind of money into this business. Even if Carmen does join us, I'm still concerned that we may not have the right level of capital and expertise to ensure our success, especially with the growth we anticipate. We should look into getting some additional advisors or put together a group of people to help us with large-scale management. We should find a way of getting some advisors regularly involved in the company.

You: This is great! I'm really excited to be working with you both and I'm looking forward to meeting Carmen. I agree with everything that's been said today and will take a stab at developing a presentation for Carmen and other investors. Let's talk again soon.

Gary: Bye.

Rosa: Have a great one!

Questions Presented:

(1) Based on what we know now from this chapter, what facts and what factors would make which business structures attractive. There are only a few wrong answers here, but a lot of creative space.

(2) There will be inherently an agreement or founding document regarding contributions, payouts, roles, powers, voting, etc. For each party, what recommendations would you make to protect their rights if things go poorly or there is a conflict? Which business structure would be most attractive to each party specifically.

(3) What ethical considerations should we make to support all stakeholders to begin with before any of these negotiations? (Be Creative)

(4) What other factors should we take into consideration when forming this business?

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1 Business Structure Considerations Partnership Given the collaborative nature of the venture and the desire for shared ownership a partnership could be attractive It offers flexibility in management ... View the full answer