Law and Ethics for Business Owners

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Entrepreneurship Law

Final Exam

1. Who owns the CadWatt Solar cell technology? What rights, if any can SSC claim on it?

SSC owned the technology, because the invention related to the SSC’s business and he had used some of SSC’s resources (namely, his SSC computer and SSC training sessions) when developing it.

2. What can Pierre do to make his departure from SSC amicable? Should he have left sooner? What ongoing obligations does he have to SSC?

Pierre should consider returning all the documents and electronic devices in which he had at hand. Pierre has a non-disclosure provision that prohibits Pierre from using or disclosing any confidential information that he learned while working for SSC. To leaving sooner he should have left before developing the company with Maya because he would have not had to go through these legal issues.

3. Can Pierre ask several of his colleagues at SSC to join his new enterprise?

If people ask about his plans, he informed them that he was leaving to start a new business and gave them a phone number where they could reach him.

4. Should Pierre and Maya hire an attorney? How do they select the right one?

Pierre and Maya should hire a attorney. They should go with a attorney that is experienced in representing high-tech startups.

5. Given their limited budget, can Pierre and Maya afford an attorney? Can they afford not to get one?

Pierre and Maya cannot afford to not hire a attorney. Counsel will allow them to turn around documents as quickly as them need them.

6. What would be an appropriate legal form for the business from a liability and tax standout?

Pierre should establish the company as either a LLC or a corporation. Which would specify the ownership interests by specifying how they would share profits, losses etc.

7. How should Pierre and Maya approach the issue of splitting the equity in the new venture between them?

Pierre and Maya concluded that Pierre should be given 50% of the equity and Maya 35%. The other 15% would go to SSC technology.

8. How will they manage their venture? What happens if one of the founders leaves?

Pierre’s attorney Sebastian proposed that the companies article of incorporation authorize 10 million of common stock and the 1million shares of common stock be issued at a price of $0.01 per share, with 500, 000 to Pierre 350,000 to Maya and a 150, 000 to SSC. He also suggested the authorization of 1.5 million shares of blank check preferred stack, based on his prediction that the initial venture investors would seek 50-60 percent of the equity.

9. What are the advantages and disadvantages of having an active board of directors? Who should sit on the board, and what should the founders expect the directors to do?

It is difficult have all directors agree on a subject. Being able to find the right people for the correct positions can be difficult. Directors must be provided with compensation, whether it’s intangible or tangible. The founders should expect the directors to act in good faith and with loyalty to the company. Pierre might also want to consider the age, gender, and cultural background of each director.

10. What are the founder’s options for financing the new venture?

Pierre and Maya could approach Pierre’s prior employer SSC and ask for financial support. Second, the founders could seek financing or corporate partnership with a company other than SSC. Third, they could find an angel investor or a group of angel investors. Fourth, they could secure a bank loan or they might be able to self finance their company.

11. Question provided on page 9 of textbook.

Pierre worked with Anita to prepare a standard at-will employment agreement which each of the workers signed. The agreement provided for a salary but no extra pay for overtime. The Americans with Disability Acts prohibits employers from questioning applicants about their general medical condition or...
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