Business Finance Homework Help

Case Facts:

Jet Black owns Black Acre Ranch. As a sole proprietor, he sustainably raises grass-fed beef cattle, free-range chicken, and organic vegetables, which he supplies to fine dining restaurants and butcheries throughout the Bay Area. Before and throughout the pandemic, Jet and his three friends—Faye, Ed, and Spike—have been talking about creating their own restaurant to feature Jet’s meat, poultry, and vegetables. Because the state and local governments have recently begun to ease some of the most restrictive COVID-19 policies, the four friends have agreed that now is the time to get serious about taking the Black Acre restaurant concept from dream to reality. Ed’s and Faye’s detailed research confirms that market conditions remain quite favorable.

To help them figure out their next steps, the group approaches you for advice, knowing that you are a business law student. They ask you about forming a company. More specifically, they want to know which legal entity is best for organizing the company. The group agrees on the following conditions:

• They each want to protect their personal assets from liability for the restaurant’s debts, court judgments, etc.
• They want to keep the restaurant small for the foreseeable future
• All four of them will exclusively participate in management decisions

Jet and Faye prefer to form a corporation. Spike thinks that some type of partnership will suffice. Ed favors a limited liability company.

Questions:

Question 1. Which form of business organization should the group select for the new restaurant?

• What would you tell them?
• Who is correct? Faye and Jet (corporation)? Spike (partnership) Ed (LLC)?

Question 2. What legal steps—if any—are required by the State of California to form the entity that you recommend for the group?

• TIP: Search online to find the rules at a government agency website or equivalent reliable source.

Question 3. Four years later, Black Acre Restaurant is highly successful and its brand enjoys a stellar reputation in the media—due in part to flattering publicity following visits from Oprah and Gayle, the Duke and Duchess of Sussex. The owners have been approached by others businesses about the possibilities for collaborating to reach the unmet demand for products carrying Black Acre Restaurant’s name, prepared using its special processes.

What legal arrangement would you suggest that would allow the owners to benefit from the restaurant’s fame? What are the advantages and disadvantages of this arrangement?