Once completing college, William Smith, a resident of Boston, Massachusetts, wanted to establish a manufacturing company that develops racquets to improve the future of squash playing. With his experience in squash playing and a finance degree he figured he could develop a great corporation.
In order to establish his corporation, he needed to find wealthy investors to fund and put trust into his future establishment. Mr. Smith receives legal advice throughout his expenditure.
After making negotiates and signing contracts he soon was informed that his design plans for the product have been denied. He was told to simultaneously stop all productions. Unable to control his disappointment, Mr. Smith acted in a violent manner and unthinkably made poor decisions that will later affect his life.
Advice for Mr. Smith
Smith should have filed a patent application with the U.S. Patent and Trademark Office. That allows an inventor such as himself, to receive a grant from the government that gives him exclusive rights to an invention. That would also give him the right to use and sell the invention during the time of the patents term.
A copyright is an intangible property right granted to authors and originators of literacy work or artistic production that falls within specified categories (pg141).
This obviously wouldn’t be of any use to Mr. Smith since he is not creating a literacy work.
The legal advice given to Mr. Smith advised that he should utilize the legal entity of a corporation. The advantage of this would be a limited liability of shareholders; the disadvantage is the double taxation of corporate income (pg806). This advice given to him wouldn’t be the best of all choices.
Most entrepreneurs and investors, popular choice of business would involve tax advantages of the partnership form of business. This type of organization would be known as a limited liability company. Mr. Smith filed the articles of organizations with the secretary of state’s office. This was the best move for him, because in order to become a limited liability company he would have to file the article of organization.
Martha Stewart and Enron, LLC “Fred Lawless”
Martha Stewart and Enron were hired by Mr. Smith to advise him on legal advice with starting his company and to solicit outside investors to fund the growth of his organization. This firm advised him that he should utilize the legal entity of a corporation.
This firm gave Mr. Smith the wrong advice. Advising him to utilize a corporation which substitutes itself for its shareholders in conducting corporate business and incurring liability.
This states that the shareholders of this corporation can be held liable for any wrongdoings that this corporation can incur. If this were to occur it would not be a positive consequence for Mr. Smith. The suit filed against this firm is legal malpractice with negligence. The firm is being held responsible for the attorney who failed to exercise reasonable care and professional judgment toward Mr. Smith.
The advice that should have been given to Mr. Smith was for him to start a limited liability company. There would only be a limited liability, which would be great for the members. Also any suit filed would go against the LLC not its shareholders who mean a great deal to Mr. Smith.
Martha Stewart and Enron, LLC should be a limited liability partnership.
An LLP is designed more for professionals who normally do business as partners in a partnership (pg811). If this firm was an LLP Fred Lawless whom Mr. Smith sued could have avoided personal liability.
Advice for Mr. Smith
Mr. Smith’s business offering prospectus should include in the contract, “That within three years from the date of production this corporation will guarantee a profitable return.
All of the checks forwarded to Mr. Smith should be held in a specific account, called an escrow account. There is an agent that holds the investor’s money in the escrow account. This money should be kept safely here in order to benefit Mr. Smith, but also so the investors can feel at ease knowing their money is being held safely. The investment money will remain in this account until all of the conditions of sale have been met and the closing takes place, at which time .