Preparing a Proper Legal Foundation: A Start-Up Fable Case Study 7.1 Preparing a Proper Legal Foundation: A Start-Up Fable

Team members Mario MA1N0225 Maria MA1N0229 Oogi MA1N0216

Introduction Jack Peterson and Sarah Jones planed to locate and operate 10 kiosk and malls and other high traffic areas to sell accessories for Apple iPods and iPhones. They created a series of short videos helping users learn how to make better use of their iPods and iPhone and sold them to the customer via streaming video on Jack and Sarah’s website.

Intro – the very begning Jack and Sarah took enterpreneurship course at university and got the initial business plan for iUser Accessories. Later, develop the plan on business planning classes. They won the university award for the best business plan ($7,500 in cash).

Introduction (Cont…) Registered their name as www.iuseraccessories.com on GoDaddy.com. Completed their feasibility analysis with firstly developed a concept statement and distributed it to total of 16 people, including professor, electronics store owners, iPod and iPhone users, and the parents of young iPod users. Concept statment participants inspired them about video streaming over the Internet and giving customers codes to the videos.

Introduction (Cont…) They surveyed their target market (410 people) age 15 to 35 years old. 52% of their target market were already Apple users or were planning to buy Apple products soon. The result affirmed that majority of their target market don’t realize the number of iPod and iPhone accessories that exist, let alone know where to get them.

Introduction (Cont…) Completed also one and three-year proforma financial statements, which demonstrated the potential viability of their business. They have commitments for $66,000 of funding from friends and family. Projected salary for each of them - $32,000 per year (more than 40 working hours a week. And the last important steps was they arranged and discussed with Attorney about their intellectual property and forms of business ownership.

Preparing for the Meeting with the Attorney At university they learned that it’s crucial to plan carefully the time with an attorney. Before the meeting they learned about forms of business ownership, and other legal issues . They prapared the concise list of issues to raise. The meeting was to be devoted to general legal issuess, the discussion of intelectual property was postponed to next meeting with other attorney.

Question 1 Complete Jack and Sarah’s list for them, including the issues you think they will place on the list along with their recommendations. Which of the issues do you think will stimulate the most discussion with the attorney, and which issues do you think will stimulate the least?

List of Legal Issues discuss with attorney Jack and Sarah’s Recommendation Notes Choosing an attorney Select an attorney early Intellectual Property -It is important for an entrepreneur to select an attorney as early as possible when developing a business venture -For issues dealing with intellectual property (patents, trademarks, and copyrights) it is essential to use a n attorney who specializes in this field. Ethically departing from an employer Behave in a professional manner Employment contracts Founder agreement Agreements between us Shareholder’s agreement- is a written document that deals with issues such as the relative split of equity among the founders of the firm, how individual founders will be sweet equity.

List of Legal Issues discuss with attorney Jack and Sarah’s Recommendation Notes Litigation Meet all contractual obligations Set standards Get everything in writing It is important to meet all contractual obligations on time. This includes paying vendors, contractors, and employees as agreed, and delivering goods or services as promised. Many business disputes arise because of lack of a written agreement do not anticipate potential areas of dispute. Choosing a form of business ownership Sole proprietorship, Partnership, corporations and limited liability companies. Tax Multiple- member taxed like partnership

Question 2 Make a list of the things you think Jack and Sarah did right in preparing for their meeting with the attorney?

Jack and Sarah had a good preparation with their attorney: Jack and Sarah tried to find a good attorney. They planned to several evenings at local bookstore, looking at books that deal with forms of business ownership and other legal issues and making a concise list of issues discuss with attorney. They prepared their business plan. They planned carefully the time they spend with attorney.

Question 3 Comment on the product feasibility analysis that Jack & Sarah completed. Do you think the way Jack and Sarah approached this task was appropriate and sufficient?

PRODUCT FEASIBILITY ANALYSIS Developed a concept statement and feasibility study then distributed it to a total of 16 peoples. Responses received: Positive Idea: To use iPod and iPhones better, via streaming videos over the internet, providing customers access codes to retrieve the videos. Surveyed 410 people in a more conventional manner. Target Market age average: 20 years old

Process of Distribution: Approaches their target market, then ask them to complete the survey. Looked for help from their marketing professors for their survey’s design. Survey design: Large Population 52% of the target market own an iPod and iPhone.

Question 4 What advantages do Jack and Sarah have starting iUser Accessories together, rather than one of them starting it as a sole entrepreneur? What challenges do you think Jack and Sarah will have keeping their partnership together?

Advantages Jack and Sarah completed one and three year pro forma financial statements, which demonstrated the potential viability of their business. They have commitments of funding from friends and family. They are fortunate in that they are able to each contribute $3,000 to the business personally and were able to gain commitments of $30,000 each from their respective groups of friends and family. They had emailed the attorney their list of issues along with their recommendations. The attorney greeted them with a firm handshake and opened a file labeled “iUser Accessories, Jack Peterson and Sarah Jones”, made it seem like their company was already real.

Challenges Disagreements can occur, because decision making among the partners is shared. The liquidity of each partner’s investment is low. The business lies on the skills and abilities of a fixed number of partner Liability on the part of each partner is unlimited.

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