The Ethical, Global, and E-Commerce Environment, Case Study Example

This group would be best suited to form a Limited Liability Partnership (LLP). This business entity would best suit all of its competing entities. By forming a LLP, it can lower the amount of personal risk. The members were able to agree on their personal membership responsibilities. The entity allows members to dictate their pre-determined contribution. The management function can be organized as well to create a partnership. The investors wanted to ensure they would not be at risk for additional investments or any additional liability. An LLP has no liability for most LLP obligation unless the member is responsible for a wrongful act. This business formation will allow Jorge and nine other investments have the majority of the control with no additional liabilities outside of their investment.

This case study shows a great idea with no previous market exposure to know how well the product will do. In addition, each member has contributed something to the business venture, and has a considerable amount to lose. “The LLP is an especially good form of business for professionals such as consultants and auditors, allowing them management flexibility while insulating them mostly from personal liability.”(Barnes et al., 932) A Limited Liability Partnership business structure offers a certain amount of protection, which was a criteria requested. Each individual would be able to participate and vote based on their percentage of ownership as agreed upon before.

1. The Structure of the Organization
2. The company will be structured as a LLP, Limited Liability Partnership
3. This structure allows for limitation of management rights
4. The duties and responsibilities of a corporation’s members
5. Aric Krafton – creator of the collapsible standard sized acoustic guitar
6. Owns product’s patent
7. Owns product’s prototype
8. Jorge Jarrison – investment banker, primary source for financing this venture
9. Personally funded $1 million for this venture
10. Brought nine clients to bring $1 million each as well
11. Virginia Baker – marketing and sales
12. Responsible for adverting and online marketplace
13. Oversees the sales of this product
14. Jackie Spruce – production
15. Experienced in instrument production
16. Can ensure fast, quality manufacturing

• Details about the board of directors

1. Aric Krafton has 25% of the venture
2. Jorge Jarrison and his group has 49% of the venture
3. Virginia Baker has 13% of the venture
4. Jackie Spruce has 13% of the venture

The voting weight is determine by the percentage of ownership. The members of the board have the right to appoint an individual to sit in their seat and represent themselves. The members do not have the right to appoint a sit-in for any other members besides their own chair.

1. Information about when and where directors’ and shareholders’ meetings will be held
2. Because the directors and shareholders are the same, there will be one quarterly meeting for both.
3. Minutes will be kept on record for the meeting
4. The actions of the members be documented
5. In the event additional meetings are necessary for any reason outside of quarterly performance, the members will be notified no less than two weeks prior to the date
6. If an emergency meeting is mandated, the members must all agree on the time and date
7. Majority does not rule unless missing member agrees to be absent from the decision-making process

Meeting transcripts, minutes, and agenda will be public record for the company. In the event a specific topic is needed, it can be submitted in writing to the board to be addressed at the next meeting. If a confidential topic is addressed, the board reserves the rights to omit that portion from the public record at their digression without notification or disclosure.

• A list of committees

Outside of the board of directors, the need of committees has not been determined. Even though the need of committees has not yet been determined, a decision making process should be formalized. The organizers will usually appoint some or all of their group to an official organization committee that will serve as the initial policy body for the association.

1. Members’ percentages of ownership
2. Aric Krafton has 25% of the venture
3. Jorge Jarrison and his group has 49% of the venture
4. Virginia Baker has 13% of the venture
5. Jackie Spruce has 13% of the venture

The member’s percentage of ownership was agreed upon by all of its members. Any change to the ownership must be agreed upon by all members, based on their percentage of ownership. The default rule is that no new partner may be admitted unless each partner has consented to the admission.

• Members’ rights and responsibilities

1. Management of Business – the board will have control and supervision of the business and all of its affairs. They will make the rules and regulations that are compliant with the law. They will determine the bylaws for the organization.
2. Employment of Management – the board will define duties, employ, determine compensation, and dismiss managers. The managers will run the business under the direction of the board.
3. Accounting and Audits – the board will determine which accounting method would best suit their company. They will voluntarily hire an external auditing firm to perform yearly audits. This will ensure that the company complies with all legal and internal requirements.
4. Committees – the necessary committees have yet to be determined. The board will appoint the head of such committees when the need has been decided.

• Allocation of profits and losses

1. Profits and losses are shared on the basis of the value of each partner’s capital contribution unless there is a written agreement to the contrary.
2. Most limited partnerships are tax shelters, partnership agreements often provide for limited partners to take all the losses of the business, up to the limit of their capital contributions.
3. Regular Redemption, Revolving Fund – the board of directors has the authority to determine that the financial condition of the association will not be harmed in any way and can issue capital credited to members’ accounts may be redeemed partially or in its entirety.
4. Discretionary Special Redemptions – the board has the complete authority to issue capital credit to any of its members. The funds must be determined to be available by its board before such decisions can be made.
5. Lenders, when you’re trying to obtain financing
6. External funding can be obtained if all members agree upon the financing method. Since all members are vested in this venture, they must determine the need to seek additional funding.
7. The method of funding and the terms of the loan must be agreed upon as well.
8. Potential business partners or investors
9. The members have agreed that there will be no additional business members added. In the event that one chooses to step-down or resign, a replacement must be agreed upon by all members, including the one whose position is being filled.
10. Investors will be utilized as the primary source of funding. In the event that Jorge finds additional investors, they will be seated under the 49% control with him and the other investors. Their percentage of ownership will not be increased.
11. Attorneys and accountants
12. The company will retain the necessary legal staff to comply with all internal and external legal obligations
13. The company has an accountant on staff that will handle the majority of the financial responsibilities. Auditing will be outsourced to prevent any type of misrepresentation or conflict of interest.

In the event the company continually declines, they will need to create an exit plan to prevent from unnecessary loss. This will be determined and finalized in their first board meeting.

In the event of a liquidation, the investors with the greatest interest will be the first ones to receive any left-over funding.

Works Cited

Barnes, A. James; Thomas Bowers; Arlen W. Langvardt; & Jane P. Mallor. Business Law 15th edition the Ethical, Global, and E-commerce Environment. (2013)