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Florida International University Suitgenics Limited Company Sharing of Profits Paper

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This document should be approximately 10 pages in length, double spaced, one-inch
margins, excluding charts and exhibits. Please make sure all sources are properly cited
using APA style. The document should cover the following legal aspects:
A. Law Firm number and group members
B. Capital structure (meaning, who contributes the equity and how much)
The capital structure of Suitgenics will be the following:
C. Management of the business, decision making, and operation of the business
The management of Suitgenics will be the following
D. Sharing of profits/losses.
Suitgenics is a Limited Liability Corporation (LLC). This means that this business
will be treated as a pass-through entity for federal income tax purposes. This
implies that if a company has income for the year the business does not pay taxes
on these profits. This is due to the fact that these profits are taxed to the members
of the LLC on their personal tax returns. A similar concept applies to losses. The
losses are also carried to the members’ personal returns. The sharing of profits
and losses will be divided as follows: the Chief Executive Officer (CEO) will have
a share of 14.32 percent. Meanwhile the Chief Financial Officer (CFO), Human
Resources Chief (HRC), Chief Marketing Officer (CMO), Chief Commercial Officer
(CCO), Chief Technology Officer (CTO), and the Chief Operating Officer (COO)
will have shares of 14.28 percent for a total of 100 percent. This split of shares was
decided like this due to that the CEO of the company contributed more capital than
the other officers.
E. Liability: What liabilities will the business and the owners have if they get
sued? How and where would they defend any legal actions?
F. Duration
G. Transferability of interests
H. Taxation
I. Assess the level of competition and profit opportunities
J. Employment issues. Who is going to work the business? Does the business
have employees or independent contractors? Is the company obligated to
provide benefits? Does the company need an employment manual?
K. Licensing and regulations: Identify what licensing and regulatory
requirements impact your business and how you are addressing them.
L. Contractual questions to consider:
I. Dispute resolution: Any corporate law disputes or business-tobusiness contractual disputes will be filed with Delaware’s Court of
Chancery. The Court of Chancery does not hear criminal cases
and rarely hears civil cases seeking only money damages;
therefore, we can obtain expert ruling from the Court within days or
weeks. In order to maintain a less hostile environment, we may
initiate mediations in the Court of Chancery without actually filing a
II. Disclaimers/waivers
III. Disclosure
IV. Choice of law/forum
V. Release of liability
Pick Your Entity
Law Firm #8
a) Prepared by:
b) What type of business entity are you forming (LLC, LLP, Corp., S corp., partnership,
Suitgenics is a Limited Liability Company (LLC).
c) State of formation.
Suitgenics is going to be incorporated in Delaware. Delaware allows for a person to incorporate a
business in the state without having to live there. We would only need to retain a Delaware
Registered Agent. Furthermore, we can file the company without having to list the names and
addresses of all owners (unless it is needed for a legal proceeding). If we do not conduct business
in the state then we do not have to obtain a business license. There are no state income taxes, gross
receipt taxes for business conducted out of the state, and no state sales tax on intangible personal
property. Additionally, we would not have to file an annual report.
Most importantly, the state of Delaware is home to the oldest business court of America– The
Delaware Court of Chancery. They have judges, instead of juries, which can speed up business
proceedings, if necessary. They also maintain up-to-date case laws which help decrease potential
liability & litigation processes.
d) Why did you select this type of entity?
After carefully considering what type of business entity to form, we elected an LLC for the
following reasons:
1- It helps to avoid double taxation because an LLC is taxed as a flow-through entity. This means
that instead of the LLC paying taxes the owners of the company are taxed at a personal level. This
is an advantage of choosing an LLC over a Corporation (C-Corp). Moreover, an LLC also provides
tax flexibility to the members because they can decide to be taxed either as a partnership or as a
2- An LLC is easier to form since it has fewer restrictions compared to a Corporation. We can
register the LLC without a lawyer, and it is more adequate when starting a business. In case of
growth, we can always convert an LLC to a Corporation.
3- An LLC structure will protect member’s personal assets against any lawsuit the business may
experience. This is due to the fact that this type of entity provides a separation between the owner’s
personal assets and company assets.
4- Another advantage is that an LLC can have a foreign investor as a member unlike an SCorporation. Thus, in the future we can attract prospective investors who want to invest in our
5- The LLC management structure is less rigid than a Corporation because it doesn’t require to
hold annual shareholder meetings nor file annual reports. In summary, owners of an LLC have
more choice in the management structure of the business compared to a corporation. As we
(owners) are going to be all active participants in the business, we prefer the option of managing
the LLC as member-managed.

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