Legal Implications Of Business Essay

1271 words - 6 pages

1. Who owns the CadWatt Solar Cell technology? What rights, if any, can SSC claim to it?
The owner of the CadWatt Solar Cell (CSC) technology is Sin Spot Cells, Inc. (SSC) because the invention is related to SSC’s business. Peter even used SSC’s resources to create it while he still was an employee. In addition he signed an agreement with Akiko Yoshida to the CSC technology while he still was a SSC employee. SSC can claim all rights of the CSC technology.

2. What can Peter do to make his departure from SSC amicable? Should he have left sooner? What ongoing obligation does he have to SSC?
In order for Peter to make his departure from SSC amicable, he must be completely honest with his ...view middle of the document...

Then, start an interviewing process. In Peter’s case, he should hire a large firm with attorneys that specialize in representing entrepreneurs. Costs might be higher; however the efficiency of the service would compensate the costs. If a friend, colleague, or another entrepreneur can refer firms to him that would be best way to start. Peter should hire an attorney that is compatible with his personality, and with some expertise and knowledge of the solar systems industry.
5. Given his limited budget, can Peter afford an attorney? Can he afford not to have one?
Legal costs can be substantial, especially for start-ups. Peter has a limited budget, but he should be able to prepare, manage, and forecast legal fees as a significant part of the start-up operating expenses. Moreover, he can be proactive, and do a rough draft of some documents. The cost of making legal mistakes will definitely outweigh the cost of getting legal guidance; and that, Peter can’t afford.
6. What would be an appropriate legal form for the business from a liability and tax standpoint?
The appropriate legal form for the business from a liability and tax standpoint would be an LLC because it would have a limited liability protection while retaining favorable partnership tax treatment. Unfortunately, Peter and Akiko are looking for venture capital financing; thus an LLC form of business would not be possible.
In addition, Peter and Akiko want to issue founder’s shares at a fraction of the price to be paid by investors and to issue tax-favored employee stock options. Which means the C Corporation is the best option.

7. How should Peter and Akiko approach the issue of splitting the equity in the new venture between the two founders?
First of all, Peter offered the opportunity to invest to SSC and they negotiated 15% of equity instead of giving up all the rights to CSC technology; thus, that part is taken, which means that the 85% remaining have to be divided between Akiko and Peter.
After careful consideration a disproportionate equity agreement was the best option based on the effort put forth by the founders. Peter created and developed the technology; thus, he acquired the biggest percentage, 50%. His cofounder Akiko having worked alongside him acquired the remaining 35% of the equity.

8. How will they manage the venture? What happens if one of the founders leaves?
They will manage the venture in the following way: the articles of incorporation will authorize ten million shares of common stock, one million shares of common stock to be issued at a price of $0.01 per share; with 50% to Peter, 35% to Akiko, and 15% to SSC, and 1.5 million shares of blank check of preferred stock. In terms of the board arrangements they decided a four person board. Additionally,...

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