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Create your own business-to-business entity (see case below). In a 1,050 to 1,750-word paper address these basic elements of business formation:
1) Idea/vision for the business
2) Identify legal and regulatory issues to be considered in creating/modifying this business
3) How you would select professionals to rely upon for business advice, and whom would you choose?
4) What legal entity choice would you make for this business and why?

Case Business Situation
Maury and Sons is an oilfield-drilling contractor. Maury has been dead for years and Monty and Max, two of Maury's grandsons, now operate the business as a general partnership. They contract with companies such as ExxonMobil and BP-Amoco. Last year's contracts exceeded $1 million in revenues, an all-time high. The partnership currently employs 50 people on oil-rig crews and 10 in administrative positions.
Monty and Max each own 25% of the business (they acquired their interests from their deceased fathers, Fred and Barney). Two aunts, Wilma and Betty, own the remaining 50%. Wilma and Betty, each in their early 80s, have no children.
The business was originally a sole proprietorship. Maury brought Fred and Barney into the business, yet there is no formal partnership agreement. Wilma and Betty have never been actively involved in the business, yet were given their interests after Maury's wife, Mable, passed away.
Monty and Max want to continue to expand the business and, eventually, sell the business to a "consolidator" (a company that buys local businesses, usually in exchange for a combination of stock, cash, and debt).

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1) Idea/vision for the business.
The idea/ vision of the business is to develop the oilfield drilling business and make it grow to such an extent that it can be eventually sold to a consolidated at a profit.
The basic vision would be to provide the best oilfield drilling services in the area at the most competitive prices.
Since the business is already having contacts with companies like ExxonMobil and BP-Amoco, the business should strive for the best business contracts in the region. The company should make sure that they meet or even exceed the expectations of their clients and establish a reputation as a high quality oilfield-drilling contractor. Moreover, the company should invest in the best equipment that is available in the market, adopt excellent safety measures for its employees and market its services to the best oil companies in the region. As the company wishes to expand it should streamline its methods of oilfield-drilling, introduce the latest quality improvement measures and focus on obtaining result that would satisfy the customer.
2) Identify legal and regulatory issues to be considered in creating/modifying this business.
There are legal and regulatory issues in modifying the business. The business can continue as a partnership, it can be turned into a limited liability company; it can be an S corporation or a C corporation. What is important about these is the objectives the business. If the company wants to continue as a partnership and Monty and Max are actively involved in the business and drawing salaries from the partnership, they would have to pay self-employment tax. On the other hand if they go in for a S corporation then Monty and Max will have to withdraw the earnings by way of dividends in order to take advantage of single taxation on S corporation income.
However, the needs of Monty and Max are different, they want to continue growing the business, which in other words means that there would be to plough back the profits into the business. The business would be allowed to grow till it is finally sold off to a consolidator.

3) How you would select professionals to rely upon for business advice, and whom would you choose? The selection process for professionals is dependent on the objective that we want the professional to fulfill, the required qualifications that the professional must possess, the work experience that the professional must have to meet the requirements of the oil-drilling business and the functions that he must fulfill in order to meet the requirements of the company. For example the process of consultant selection is given below. Even though the selection process is not a business but the process is very thorough and fully applicable to business situations. The following part is taken direct from the website: http://www.planning.org/consultant
"Sole-Source Procurement
Using this approach, an agency selects a single consultant either for a particular task or for a continuing relationship. Not all local governments have the flexibility to use this selection process, and an agency considering this option should consult with its legal adviser. For both legal and political reasons, an agency using sole-source procurement should document its reasons for doing so. Where a local government has the flexibility to use such a selection process, it may be appropriate to do so under the following circumstances:
1. When a consultant, due to prior work with the local government, has significant background in a matter requiring resolution in a short period of time or on a very limited budget
2. When it is politically or practically necessary to retain a local consultant, and there is only one who is qualified
3. When the community requires the services of a consultant with a unique specialty
4. If there is not sufficient time to go through a formal search procedure
5. When significant cost savings can be achieved by using a consultant who is familiar with the community and the agency and its procedures
Selection from a List of Prequalified Candidates
This process is particularly ...

Solution Summary

Contract law is discussed in great detail in this solution.

See Also This Related BrainMass Solution

Like the UCC, the UCITA will remain as a model act until it has been presented to each state's legislature and until it is adopted as part of the state's statutory law.

(Uniform Law for Computer Info Transactions is Offered National Law Journal, August 30, 1999.

After more than 10 years of proposals, revisions and re-revisions, the National Conference of Commissioners on Uniform State Laws (NCCUSL) at long last voted to adopt the Uniform Computer Information Transactions Act (UCITA) on July 29. Like its better known cousin, the Uniform Commercial Code (UCC), this act is intended to promote uniformity in the area of computer information transactions.

"What are computer information transactions?" you ask? Under the language of the model act, they would include any "commercial agreements to create, modify, transfer or distribute computer software, multimedia interactive products, computer data and databases [and] Internet and online information." Members of the NCCUSL have been concerned about the lack of clear, consistent rules governing such transactions in this rapidly expanding part of our national economy (which now accounts for more than a third of the nation's economic growth). Contracts for computer information may be valid in one state while not in others, or terms within such contracts may or may not be enforced, thus creating uncertainty and risk which both sides to such contracts would prefer to avoid.

Five basic themes underlie many of the provisions of the UCITA. They are the following:

- Computer information transactions involve licenses, not sales.

- Small companies play a more significant role in the computer information industry than many other industries.

- Computer information transactions implicate fundamental free speech issues.

- Freedom to contract and practical commercial context of the transactions are important.

- The law should facilitate continued expansion of e-commerce and be technologically neutral.

Like the UCC, the UCITA will remain as a model act until it has been presented to each state's legislature and until it is adopted as part of the state's statutory law. That could be its biggest hurdle yet. Several well-funded information industry groups remain opposed to some of the terms contained in the model act's language. Many consumer advocates would also like to see more protection for consumers be added. Because these groups may have more sway over legislatures in some states than others, the result may be a uniform act that differs from state to state. Does that sound unusual? Its not?remember that UCITA's distant cousin, the UCC, also varies from state to state.

Answer the following questions:

1.) Before the UCC and the UCITA, what was one of the first, and most significant, of the U.S. government's attempts to promote uniformity in commercial laws from state to state? (Hint: think of "commerce" and Constitution).

2.) Based on the information presented above, what do you see as the major differences between Article 2 of the Uniform Commercial Code and UCITA?

3.) What is the legal distinction between selling a product and licensing it?

4.) Many of the provisions in the UCITA were first proposed as a modification to Article 2 of the UCC. Why do you think the drafters decided to propose it as a separate and distinct uniform act?

Instructor Comments:
Dear Students, In regard to Question 1, see Article 1, Section 8, Clause 3 of the U.S. Constitution. Note that the Uniform Commercial Code ("U.C.C.") (Article 2) is the most important contracts law, governing the sale of goods, in the United States. It is a "national" law, having been adopted by each state (except Louisiana), with some state variations in its provisions. See www.law.cornell.edu/topics/contracts.html. See also "State Material" on the right side of your screen on this website page. You may find information on U.C.I.T.A. at the website included in the Assignment. And see, www.arl.org/info/frn/copy/ucitapg.html#ucc2b for discussion about and objections to U.C.I.T.A. Hints for Excellent Work: Be sure to show that you have a clear idea of the essential differences between Article 2 of the U.C.C. and U.C.I.T.A., and support your answer to Question 4 with an in-depth discussion, using relevant sources as support (please include references).

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