Steve is a 52-year-old mechanical genius. He has just invented a device sure to make a million, a billion! It is an automatic laundry sorter that utilizes nanotechnology to determine color, weight and size and will be every person’s dream gift. This is not Steve’s first invention, and he has become seriously wealthy with prior clever ideas. At this point in his life, he has a big income from prior projects, a huge house with no mortgage, a wife and five kids under the age of 18. Two of the kids are teenagers that seem to have inherited Steve’s interest in technology. The problem with Steve is that he is pathologically shy, and has no clue how to get his product out there in the marketplace. He has decided he no longer wishes to use his prior partners, attorneys or contacts to market this new device.
Steve meets Ben. Ben is only 21 years old, single, rents a one-room apartment where he lives with his cat, and is fairly eccentric—his main passion in life is participating in dodgeball tournaments. He has already run through 3 different franchises and came close to being indicted for Internet stock fraud when he was only 16. He is, however, a marketing genius—he is the brains behind 3 of the great marketing ideas of the last 3 years. He has never saved a cent—his personality is such that he ends up alienating his employees or partners and because he does not trust attorneys, he has never gotten the ironclad legal agreement that would protect him when these partners throw him out of the business.
Steve and Ben meet at a cat show, and although they really don’t know each other well, they recognize that each has what the other needs, and they decide to go into business together. Steve at first wanted to just hire Ben as a marketing consultant, but Ben does not want to just be Steve’s employee. Ben wanted to take an option on Steve’s invention, but that was not agreeable to Steve. Some sort of business formation is the key, but the question is what form of business? Lucky for Steve and Ben, you are in the picture. You are an attorney/business consultant hired by one of the above individuals to represent him and counsel him. It is up to you to decide the best type of business for whichever individual you are assigned and write a persuasive letter (of 2 to 4 screens) to your client discussing your decision. Your client will no doubt be astonished and pleased with your insight, and will thereafter authorize you to negotiate on his behalf with the other party to result in a memorandum of agreement (of about 1 screen).
You will no doubt want to consider the following, but you are certainly free to (and encouraged to) discuss any other issues you believe to be pertinent:
• management issues
• liability issues
• taxation issues
• inheritance issues
• nepotism
If you opt for a partnership form, you will need to discuss what law you are using and what provisions will be addressed in the partnership agreement.
If you opt for the corporate form, you will need to discuss what roles each individual will play, distribution of shares, etc.