Past Assignments – Business Planning Fall 2020

 

Business Planning Will Start on Tuesday, September 1st

ATTENDANCE AT THE FIRST CLASS SESSION IS REQUIRED

(unless prior permission is granted by Prof. Ehrlich)

 

1.    Assignment for Class #1 – Tuesday, September 1:

a.    During the first class session, we will focus on the role of the lawyer in advising business clients.  For the first class:

                                          i.    Read the short online Introductory Materials.

                                         ii.    Read pages 1-12 of Ehrlich & Michaels. You can find the readings by Clicking Here if your book has not yet arrived.

    1. Read one of the following two books: You probably already own one of these books. If you don’t, there are many copies on reserve in the Library and lots of used copies around.  You can find a copy on Amazon.com for under $5. It is fast reading

                                          i.    Fisher & Ury, GETTING TO YES: Read pages 1 through 94.  Note that page number “94" is approximate (depending on the edition you read). Read through the section called “Insist on Using Objective Criteria”. 

 – or – 

Ury, GETTING PAST NO: Read pages 1 through 129.  Note that page number “129" is approximate (depending on the edition you read). Read through the section called “Build Them a Golden Bridge”. 

2.    Class #2 – Thursday, September 3:

a.    Assignment #2: The Attorney Client Relationship:

                                          i.    Review pages 13-19 of Ehrlich and Michael (“E&M”)

                                         ii.    Read pages 19-38 of E&M

                                        iii.    Read CEB, Forming & Operating California Limited Liability Companies: §§ 2.1 to 2.14.  See Access to CEB Publications below for instructions on on-line access to CEB materials.

3.    Class #3 – Tuesday, September 8:

a.    Prepare a preliminary draft of a “Disclosure Statement and Informed Consent” letter for the clients. The letter should adequately disclose/explain the issues and potential conflicts that may arise as a result of multiple representation of the clients. This assignment will not be graded. Use the materials to formulate a draft of the letter. You can find a copy of the Ehrlich & Michael, Sample Informed Consent to Multiple Representation, in Google Drive Business Planning Folder.

                                          i.    Click here for a full copy of the assignment.

                                         ii.    Please submit the assignment on Canvas. https://cwsl.instructure.com/courses/646

b.    Comparisons of Business Entities - Non-Tax Considerations: We will undertake an overview of the non-tax considerations in selecting a form of business entity. This is an important matter for the client, and often requires explanation and advice by the attorney.

                                          i.    In class you will be divided into "Focus Groups" to refine the characteristics of each entity: Focus Groups – Non-Tax Considerations

                                         ii.    In preparation for class, read the following materials:

1.    Ehrlich & Michael, Chapter 2.

2.    CEBLLC: §§ 3.5 to 3.8; and §§3.9 to 3.14

3.    Introduction to California LLC’s (online in pdf format).

                                        iii.    You should also complete the Comparison Chart (online in Word format).

                                       iv.    In class, you should be prepared to explain to your client the alternative forms of business entities that are available to the client, as well as the benefits and detriments of each form. You should also be prepared to advise the client about which form of business entity is most appropriate for the circumstances of their business venture.

4.    Class #4 – Thursday, September 10 – Tax Considerations:

a.    Tax Considerations (we will spend 2 classes on this material): In the first class on taxation of business entities, we will undertake an overview of the tax considerations in selecting a form of business entity. You are assigned to Focus Groups for this material: Focus Groups – Tax Considerations

b.    Bring the following handouts to class & sit with your Focus Group. I handed out hard copies of the following in class last Thursday – but if you need another copy you can click on the links below:

                                          i.    Form 1040

                                         ii.    Focus Groups – Tax Considerations

                                        iii.    Questions For Tax Focus Groups

c.     Readings:

                                          i.    Ehrlich & Michael, Chapter 3 **SPECIAL NOTE**: I HAVE RE-WRITTEN THE FIRST 7 PAGES OF CHAPTER 3. You can find the revised pages on the Google Drive website.

                                         ii.    CEBLLC, §§ 4.1 to 4.39.

d.    This may be difficult material for students who have not taken income taxation. By the end of 2½ classes you will have a basic and workable understanding of tax issues. Read the materials and try to get a feel for the general tax considerations. Don’t go too deep. But, as you read, keep in mind:

                                          i.    The differences in income tax consequences to the investors based on the type of organization formed.

                                         ii.    The basic tax implications of contributions to the capital of the organization (do the investors face any tax consequences if they invest cash, property or services?)

                                        iii.    The basic tax implications of distributions of profits, losses and capital by the organization to its investors.

5.    Class #5 – Tuesday, September 15 – Tax Considerations (Continued):

a.    This will be our second class on income taxation.

                                          i.    Focus Groups – Tax Considerations

                                         ii.    Questions For Tax Focus Groups

b.    Readings:

                                          i.    Ehrlich & Michael, Chapter 3

                                         ii.    Make sure you read the Ehrlich & Michael Supplement, Chapter 3 (available on Google Drive)

                                        iii.    CEBLLC, §§ 4.1 to 4.39.

Class CANCELLED -- Thursday, September 17

Writing Assignment Due Dates (see below for details)

c.     Due Tuesday, September 22

                                          i.    Interview Checklist: In preparation for the interview you must prepare a “checklist.” The checklist should include your thoughts regarding the structure and content of the interview.

d.    Due Tuesday, September 29

                                          i.    Attorney Client Agreement: Prepare an attorney-client agreement for the clients

                                        ii.    Disclosure Statement and Informed Consent (“DSIC”) You previously prepared this document in draft form. The DSIC explains the issues and potential conflicts that may arise as a result of multiple representation of the clients.

6.    Class #6 -- Tuesday, September 22

a.    Interviewing Clients:

                                          i.    Readings:

1.    CEBLLC §§ 3.1 to 3.13.

2.    Read “The Initial Attorney-Client Interview” (also available on Google Drive)

b.    Written Assignment – Client Interview Checklist Due in Class Today:

                                          i.    Prepare, in writing, a comprehensive checklist of the matters to be discussed with the client at the upcoming client interview (see above).

1.    The checklist should include your thoughts regarding the structure and content of the interview.

                                         ii.    To help you prepare the checklist, your potential clients completed an “intake” form. A summary of the intake form is attached (also available on Google Drive

                                       iii.    Upload your Interview Checklist to Canvas.

c.     Prepare to Conduct A Client Interview

                                          i.    You will be interviewing “Ann or Art”, “Bev” or “Bob”, “Carl” or “Carla” in connection with a proposed venture he/she/they are considering.

                                         ii.    I will ask students to work in teams of two to participate in various components of the interview.

                                        iii.    Make sure you plan out the beginning, middle and end of the interview. Structure the interview in the following segments:

d.    The Goals of the Attorney Client Interview. Prepare to conduct an attorney client interview.

                                          i.    Structuring the interview

1.    Opening of the interview (introductions, welcome, outline of the content of the interview)

2.    Conducting the interview (see below)

3.    Closing the interview (summarize the interview, restate objectives & role of law firm, specify next steps).

                                         ii.    Conducting the interview

1.    Determine client’s objectives and goals.

2.    Begin to gather info/data about the clients and their objectives & goals

3.    Begin process of analysis & advice

4.    Any immediate client needs or concerns

5.    Nurture the attorney-client relationship – including discussion of professional fees, scope of work & conflicts

6.    Review the important parts of the attorney-client contract

7.    Discuss the issue of representing multiple clients and the need for informed consent

8.    Plan for future action.

1.    A/C Agreement & Deposit

2.    Gathering complete information

3.    Next meeting

7.    Class #7 – Thursday, September 24:

a.    Reminder: Writing assignment due next Tuesday, September 29: See Class #8 below for information.

b.    Federal & State Securities Considerations: During the next four classes we will review the federal and state securities considerations in connection with the offer and sale of investment interests in a newly formed business entity.  This is an extremely important matter for the client, and often requires explanation and advice by the attorney. 

c.     Class #1 of 3: Introduction to Federal Securities Regulation:

                                          i.    For next class we will be studying the federal Securities Act of 1933 (and the related Rules of the Securities and Exchange Commission) in the Statutory Supplement.  The Securities Act of 1933 (the "Act") provides the statutory basis for exemptions from the requirement that securities be registered with the SEC.  Unless a statutory exemption can be found, §5 of the Act requires that all securities must be registered.  The cost of registration is usually in the hundreds of thousands of dollars.  In most "modest" business formations the task of the lawyer is to assure that the offer and sale of investment interests (such as stock in a corporation or memberships in a limited liability company) are exempt from federal registration requirements. The SEC has adopted rules regarding the application of the statutory provisions of the Securities Act of 1933. The most commonly applied rules, Rules 147, 504 and 506, each reflect an administrative interpretation or application of one of the sections of the Act. We will also be evaluating one of the newer rules that applies primarily to California, Rule 1001. Make sure that you match the Act statutory exemption with the Rule interpreting or applying that section.

                                         ii.    Read the statutory materials at Statutory Supplement pages 85-97 (available on the Google Drive). <- We will be relying heavily on the statute. It’s going to be dense until we clear it up in class but do your best to follow it.

1.    You might want to print out a copy of these pages for use during class.

                                        iii.    Read SEC Rules 147 & 147A at pages 98-106.

                                       iv.    Ehrlich & Michael, Chapter 4 up to page 155 (don’t read Ralston Purina which begins on page 155).

                                         v.    Ehrlich & Michael, “Intrastate Offerings” beginning on page 158 through page 162

                                       vi.    CEBLLC, §§12.12 to 12.19

                                      vii.    CEBLLC, §§12.28 to 12.31

d.    Anti-fraud Rules:

                                          i.    Review the following sections in the Statutory Supplement

1.    Section 12 at page 96

2.    Section 17 at page 97

                                         ii.    Ehrlich & Michael, pages 184-191.

                                        iii.    CEBLLC, §§ 12.38-12.42.

Writing Assignment Due Dates (see below for details)

a.    Due Tuesday, September 29

                                          i.    Attorney Client Agreement: Prepare an attorney-client agreement for the clients

                                        ii.    Disclosure Statement and Informed Consent (“DSIC”) You previously prepared this document in draft form. The DSIC explains the issues and potential conflicts that may arise as a result of multiple representation of the clients.

8.    Class #8 – Tuesday, September 29:

a.    Written Assignment Due on Tuesday, September 29 -- Attorney-Client Agreement + Informed Consent & Disclosure

                                          i.    A complete “client profile” with full information is available in the Google Drive folder.

                                         ii.    You must prepare this exercise with a partner. 

                                        iii.    After the Attorney Client Interview a summary of the information that should have been obtained from the clients will be available on the Google Drive (look for a document called Client Profile For Actors.pdf.

                                       iv.    Use this information and your experience during the client interview, to complete an Attorney-Client Agreement for these clients based on an hourly rate of $300 per hour for attorney legal services. 

                                         v.    You can use as your sources: (i) The Agreement in the CEBLLC book beginning at §2.15; (ii) the California State Bar Forms; and/or, (iii) the sample clauses in E&M. Digital copies of all of these forms are in Google Drive. Feel free to combine the best of all three sources.

                                       vi.    Make sure you include a "Disclosure Statement and Informed Consent” document along with the Attorney-Client Agreement.

b.    Exemption from Securities Registration: In class we will break up into Focus Groups to prepare for presentations.

                                          i.    Review Ehrlich & Michael, Chapter 4 up to page 155

                                         ii.    Review Ehrlich & Michael, “Intrastate Offerings” beginning on page 158 through page 162

                                        iii.    Review Ehrlich & Michael, pages 184-191.

                                       iv.    Carefully review §3(a)(11), §3(b) & §4(a)(2) of the Securities Act in the Statutory Supplement. We will be focusing on the following exemptions:

1.    Intrastate exemption

2.    Limited offering exemption

3.    Private offering exemption

4.    A brief overview of the new “crowdfunding” exemption (effective 2013).

c.     Read Ehrlich & Michael, pages 155-158 and 163-178.

d.    Read CEBLLC, §§ 12.20-12.27.

e.    Everyone:

                                          i.    Read and concentrate on Rules 501 through 506 beginning at page 107 of the Statutory Supplement. I have placed a condensed and marked copy in the Google Drive folder

                                         ii.    Peruse Rules 507 and 508.

                                        iii.    Note that three of the four exemptions refer to Rules 501 and 502, which provide important limits and definitions. Read them carefully and determine how they interact with Rules 504 and 506.

                                       iv.    Pay close attention to the concepts of “integration” and “aggregation” when you review the Rules.

                                         v.    Make sure you consider the impact of the Dodd-Frank Act of 2010 beginning at page 119 of the Statutory Supplement.

f.      Four students will be “Group Leaders and responsible for a presentation on Tuesday, October 5th on the exemptions under: (i) §3(a)(11) & Rule 147, (ii) §3(b) & Rule 504, and (iii) §4(a)(2) & Rule 506. During class, these students will be responsible for “chairing” exploratory groups regarding these exemptions.

                                          i.    The focus groups and guidance are located in this document: Focus Sheet Securities Exemptions.

                                         ii.    The group leaders are:

1.    TBA: Rule 147 [§3(a)(11) of the Securities Act of 1933]: Exemption for Intrastate Offers and Sales of Securities.

2.    TBA: Rule 504 [§3(b) of the Securities Act of 1933]: Exemption for Limited Offers and Sales of Securities Not Exceeding $5,000,000 (often referred to as "Small Offerings & Sales") 

3.    TBA: Rule 506(b) [§4(a)(2) of the Securities Act of 1933]: Exemption for Limited Offers and Sales Without Regard to Dollar Amount of Offering (often referred to as "Private Offerings & Sales")

4.    TBA: Rule 506(c) [§4(a)(2) of the Securities Act of 1933]: Exemption for Limited Offers and Sales Without Regard to Dollar Amount of Offering (often referred to as "Private Offerings & Sales")

                                        iii.    Note that Rule 504 & Rule 506(b) & 506(c) refer to Rules 501 and 502, which provide important limits and definitions. Read them carefully and determine how they interact with Rules 504 and 506.

                                       iv.    Make sure you consider the impact of

1.    The Dodd-Frank Act of 2010 at page 121 of the Statutory Supplement.

2.    The JOBS Act at page 85 of the Statutory Supplement.

9.    Class #9 – Thursday, October 1:

a.    Exemption from Securities Registration: In class we will break up into Focus Groups to prepare for presentations.

                                          i.    Review Ehrlich & Michael, Chapter 4 up to page 155

                                         ii.    Review Ehrlich & Michael, “Intrastate Offerings” beginning on page 158 through page 162

                                        iii.    Review Ehrlich & Michael, pages 184-191.

                                       iv.    Carefully review §3(a)(11), §3(b) & §4(a)(2) of the Securities Act in the Statutory Supplement. We will be focusing on the following exemptions:

1.    Intrastate exemption

2.    Limited offering exemption

3.    Private offering exemption

4.    A brief overview of the new “crowdfunding” exemption (effective 2013).

b.    Read Ehrlich & Michael, pages 155-158 and 163-178.

c.     Read CEBLLC, §§ 12.20-12.27.

d.    Everyone:

                                          i.    Read and concentrate on Rules 501 through 506 beginning at page 107 of the Statutory Supplement. I have placed a condensed and marked copy in the Google Drive folder

                                         ii.    Peruse Rules 507 and 508.

                                        iii.    Note that three of the four exemptions refer to Rules 501 and 502, which provide important limits and definitions. Read them carefully and determine how they interact with Rules 504 and 506.

                                       iv.    Pay close attention to the concepts of “integration” and “aggregation” when you review the Rules.

                                         v.    Make sure you consider the impact of the Dodd-Frank Act of 2010 beginning at page 119 of the Statutory Supplement.

e.    Four students will be “Group Leaders and responsible for a presentation on Tuesday, October 5th on the exemptions under: (i) §3(a)(11) & Rule 147, (ii) §3(b) & Rule 504, and (iii) §4(a)(2) & Rule 506. During class, these students will be responsible for “chairing” exploratory groups regarding these exemptions.

                                          i.    The focus groups and guidance are located in this document: Focus Sheet Securities Exemptions.

                                         ii.    The group leaders are:

1.    TBA: Rule 147 [§3(a)(11) of the Securities Act of 1933]: Exemption for Intrastate Offers and Sales of Securities.

2.    TBA: Rule 504 [§3(b) of the Securities Act of 1933]: Exemption for Limited Offers and Sales of Securities Not Exceeding $5,000,000 (often referred to as "Small Offerings & Sales") 

3.    TBA: Rule 506(b) [§4(a)(2) of the Securities Act of 1933]: Exemption for Limited Offers and Sales Without Regard to Dollar Amount of Offering (often referred to as "Private Offerings & Sales")

4.    TBA: Rule 506(c) [§4(a)(2) of the Securities Act of 1933]: Exemption for Limited Offers and Sales Without Regard to Dollar Amount of Offering (often referred to as "Private Offerings & Sales")

10.  Class #10 – Tuesday, October 6:

a.    Exemptions from Securities Registration -- Presentations by Focus Group leaders

                                          i.    The group leaders are:

1.    Sosha: Rule 147 [§3(a)(11) of the Securities Act of 1933]: Exemption for Intrastate Offers and Sales of Securities.

2.    Jake: Rule 504 [§3(b) of the Securities Act of 1933]: Exemption for Limited Offers and Sales of Securities Not Exceeding $5,000,000 (often referred to as "Small Offerings & Sales") 

3.    Peter: Rule 506(b) [§4(a)(2) of the Securities Act of 1933]: Exemption for Limited Offers and Sales Without Regard to Dollar Amount of Offering (often referred to as "Private Offerings & Sales")

4.    Dan: Rule 506(c) [§4(a)(2) of the Securities Act of 1933]: Exemption for Limited Offers and Sales Without Regard to Dollar Amount of Offering (often referred to as "Private Offerings & Sales")

                                         ii.    Note that Rule 504 & Rule 506(b) & 506(c) refer to Rules 501 and 502, which provide important limits and definitions. Read them carefully and determine how they interact with Rules 504 and 506.

b.    In class Group Reports: In class each focus group will have time to review the exemption they are covering.  After the review, there will be reports from each group.

11.  Class #11 – Thursday, October 8:

a.    Resales: Prof. Ehrlich will discuss the issue of resales by purchasers of “restricted” securities (securities sold under an exemption).

                                          i.    Resale Hypo:

1.    Art, Bev & Carl created an LLC to market a new social media app. The app is promising and may overtake WhatsApp, TikTok, Instagram & Messenger as the dominant social media app. The initial round of financing was $25 million from 10 very wealthy individual investors ($2.5 million each). The entity was formed, and the securities sold (using a Rule 506(c) exemption), on October 1, 2020. Each investor received 1 membership unit.

2.    The app was mega-successful and, on January 1, 2021, each membership unit is worth approximately $30 million! One of the investors, Lucky, wants to sell her membership unit to Google for $30 million. Can she do so?

1.    Is she re-selling a “security”?

2.    Must she find an exemption for the resale?

3.    To answer the question, read carefully the following sections of the Securities Act:

1.    §502(d)(1) and (2)

2.    §4(a)(1) and take careful note of the words “issuer” “underwriter” and “dealer”

3.    §2(a)(4), (a)(11) and (a)(12) for the definitions of “issuer”, “underwriter” and “dealer.”

4.    https://content.next.westlaw.com/8-382-3798?transitionType=Default&contextData=(sc.Default)&__lrTS=20170927102234497&firstPage=true

b.    State Securities Exemptions

                                          i.    Focus Groups for California Exemptions

                                         ii.    Read the excerpt regarding Federal Preemption of State Qualification available in the Google Drive folder.

                                        iii.    Read the relevant sections from the California Corporations Code and California Code of Regulations.  A condensed version of these materials is available on the Google Drive folder.

1.    Concentrate on §§25102(f), 25102(h) & 25102(n) of the Corporations Code and Rules 260.102.12 and 260.102.13 of the Code of Regulations.  Also concentrate on SEC Rule 1001 (page 119 of the Statutory Supplement) and CEBLLC 12.32.

                                       iv.    On Lexis you can find good background materials on California securities law.  Sign into Lexis and search for “Practice Under the California Securities Law.”

                                         v.    Ehrlich & Michael pages 191 (bottom) -194.

                                       vi.    Read CEBLLC §§12.47, 12.49, 12.51 to 12.57.  You can access these materials on the CWSL Library website (see Access to CEB Materials below)

                                      vii.    Look over the California State Forms & Instructions:

1.    25102(f): Notice of Transaction and Instructions

2.    25102(h): Notice of Issuance of Securities

3.    25102(n): Complete packet including instructions and forms.

12.  Class #12 – Tuesday, October 13:

a.    Final Steps for Exemption Planning -- Subscription Agreements, Investor Certificates & Questionnaires

                                          i.    We will discuss the role of the following documents

1.    Subscription Agreements

2.    Investor Certificates and Questionnaires

3.    Purchaser Representative Certificates

                                         ii.    Carefully review documents

1.    I am placing sample Investor Certificates & Subscription Agreement in the Google Drive folder.  Make sure you review them -- and bring a copy to class (hard or digital copy).   We will go through the certificate line by line.

                                        iii.    Read: 

1.    On LEXIS, search for “Securities Law Techniques 1.06”.  This will take you to a Matthew Bender excerpt that sums up the role of these documents. 

2.    You can find additional helpful materials on LEXIS regarding California securities law.  Sign into Lexis and search for “Practice Under the California Securities Law.”

3.    Read CEBLLC (see Access to CEB Materials below): §§ 12.23; 12.58 (Purchaser's Investment Representation), §12.59 (The form referred to is a “Subscription Agreement” and is available in the Google Drive folder); §12.60 (The form referred to in §12.60 is a “Investor Certificate” and is available in the Google Drive folder), §12.61 (Form: Professional adviser questionnaire). 

4.    CEBACP (Advising California Partnerships) (see Access to CEB Materials below): § 11.55 (Form: Subscription Agreement)

5.    Optional Reading: CEB, §§12.51 to 12.55.

**Monday, October 19: Writing Assignment Due: I will go over this with you in class on Tuesday. To wrap up the securities materials, you will have to prepare and submit an “Investor Certificate.”  The assignment is due no later than 4:00 pm.  Full instructions for the assignment can be found here.

13.  Class #13 – Thursday October 15:

a.    The reading assignment is long but we will be focusing on this material for 2 classes.  Keep your Focus Group in mind as you read the materials.

b.    Financing the Venture as a Corporation: We will discuss the financing of the venture as a corporation.

                                                i.    See Focus Sheet – Control & Financing Corporate Entities

                                               ii.    Read Ehrlich & Michael, pages 203-242 and 247-249.

                                              iii.    Read Organizing Corporations in California (CEBOOC): 2.22-2.60 (see Access to CEB Materials below)

                                             iv.    Counseling California Corporations 1.83-1.85. (see Access to CEB Materials below)

c.     Financing Non-Corporate Entities:

                                                i.    See the Focus Sheet – Control & Financing of Partnerships & LLC's for group assignments:

                                               ii.    Read Ehrlich & Michael, pages 242 to 270.

                                              iii.    Advising California Partnerships (CEBACP): 4.28-4.32 and 5.48-5.54

                                             iv.    Forming & Operating California Limited Liability Companies (CEBLLC): 6.43-6.52

                                               v.    Review the Focus Sheet on Non-Corporate Finance

                                             vi.    Advising California Partnerships (CEBACP): 4.28-4.32 and 5.48-5.54

14.  Class #14 – Tuesday, October 20:

a.    We will continue working on Financing & Control of Business Entities

b.    Financing the Venture as a Corporation: We will discuss the financing of the venture as a corporation..

                                                i.    See Focus Sheet – Control & Financing Corporate Entities

                                               ii.    Read Ehrlich & Michael, pages 203-242 and 247-249.

                                              iii.    Read Organizing Corporations in California (CEBOOC): 2.22-2.60 (see Access to CEB Materials below)

                                             iv.    Counseling California Corporations 1.83-1.85. (see Access to CEB Materials below)

c.     Financing Non-Corporate Entities:

                                                i.    See the Focus Sheet – Control & Financing of Partnerships & LLC's for group assignments:

                                               ii.    Read Ehrlich & Michael, pages 242 to 270.

                                              iii.    Advising California Partnerships (CEBACP): 4.28-4.32 and 5.48-5.54

                                             iv.    Forming & Operating California Limited Liability Companies (CEBLLC): 6.43-6.52

                                               v.    Review the Focus Sheet on Non-Corporate Finance

                                             vi.    Advising California Partnerships (CEBACP): 4.28-4.32 and 5.48-5.54

15.  Class #15 – Thursday, October 22:

a.    Class presentations: Financing of Business Entities: In class we will ask the four presenters to do a presentation on the material assigned to their group. If you have a hard copy handout, get it to me by email a few hours before class and I can have it duplicated. If you intend to present a slideshow, bring a USB storage device with the slideshow on it. (a) Focus Sheet – Control & Financing of Corporation; (b) Focus Sheet – Control & Financing of Partnerships & LLC’s 

                                          i.    Group A Leader: Financing & control of Corporations with only one class of common stock

                                         ii.    Group B Leader: Financing & control of Corporations with common and preferred stock.

                                        iii.    Group C Leader: Financing & control of Limited Liability Companies – Manager Managed Perspective

                                       iv.    Group D Leader: Financing & control of Limited Liability Companies – Member Managed Perspective

16.  Class #16 – Tuesday, October 27:

a.    Formation of a Corporation

                                          i.    Statutory Close Corporations

1.    Selected provisions from the California Corporations Code in the Statutory Supplement (from pages 132-136). Start with §300(a) and (b). Pay very close attention to §300(b).

2.    Carefully read §202(a) on page 132 of the Statutory Supplement

3.    Read the paragraph following §204(a)(1)-(11) on page 134 of the Statutory Supplement.

                                         ii.    Formation of a Corporation – Articles

1.    Read pages 45-47 in Ehrlich & Michael.

2.    Read §§200-210 of the California Corporations Code at Statutory Supplement pages 137-142.

3.    Review the Sample Articles of Incorporation on the Business Portal page maintained by the California Secretary of State.

                                        iii.    Formation of a Corporation – Bylaws

1.    Read California Corporations Code §§211-213 at Statutory Supplement pages 142-143.

2.    Why have Bylaws? Are Bylaws required?

17.   Class #17 – Thursday, October 29:

a.    Buy-Sell Agreements:

                                          i.    Read Ehrlich & Michaels, Chapter 8.

b.    See the Focus Sheet for Buy-Sell Agreements. In class we will be discussing the readings and reviewing a buyout agreement. Take a look at the Sample Buy-Sell Agreement (in the Google Drive Folder) and think about the purpose of each of the provisions. What was the drafter trying to accomplish with each provision? Keep in mind the following:

                                          i.    Purposes: Why have a buy-sell agreement? What purpose(s) does it serve?

                                         ii.    Triggering Events: What are the events that "trigger" the implementation of the obligation to sell and/or buy the shares?

                                        iii.    Procedures to be followed: Once the trigger has been established, what are the procedures that the parties must follow to complete the buy-sell?

                                         v.    Valuation issues: What is the price to be paid by the buyer(s) to the seller(s)? If the price is not fixed in the agreement, how is the price to be determined? As you review these issues in the Agreement sure that there are some objective standards that can be used to facilitate the determination of the price.

                                       vi.    Financing Issues: How do the non-departing owners finance the cost of the buyout?

18.  Class #18 – Tuesday, November 3:

a.    Buy-Sell Agreements:

                                          i.    Read Ehrlich & Michaels, Chapter 8.

b.    See the Focus Sheet for Buy-Sell Agreements. In class we will be discussing the readings and reviewing a buyout agreement. Take a look at the Sample Buy-Sell Agreement (in the Google Drive Folder) and think about the purpose of each of the provisions. What was the drafter trying to accomplish with each provision? Keep in mind the following:

                                          i.    Purposes: Why have a buy-sell agreement? What purpose(s) does it serve?

                                         ii.    Triggering Events: What are the events that "trigger" the implementation of the obligation to sell and/or buy the shares?

                                        iii.    Procedures to be followed: Once the trigger has been established, what are the procedures that the parties must follow to complete the buy-sell?

                                      vii.    Valuation issues: What is the price to be paid by the buyer(s) to the seller(s)? If the price is not fixed in the agreement, how is the price to be determined? As you review these issues in the Agreement sure that there are some objective standards that can be used to facilitate the determination of the price.

                                     viii.    Financing Issues: How do the non-departing owners finance the cost of the buyout?

19.  Class #19 – Thursday, November 5:

a.    Buy-Sell Agreements – Presentations: In class we will ask the Group Leaders to do a presentation on the material assigned to their group. Group leaders may want to prepare handouts or PowerPoint slide shows. If you have a hard copy handout, get it to me by email a few hours before class and I can have it duplicated. If you intend to present a slideshow, bring a USB storage device with the slideshow on it.

                                          i.    Group A: TBD

                                         ii.    Group B: TBD

                                        iii.    Group C: TBD

                                       iv.    Group D: TBD

20.  Class #20 – Tuesday, November 10

a.    LLC focus Groups

b.    Note: A marked copy of the relevant California LLC statutes is online in the Google Drive folder

c.     Limited Liability Companies: We will begin our exploration of formation, operation & dissolution of limited liability companies. Read the material from the perspective of an attorney representing Ann, Bev and Carl regarding the formation of Sonic Fish House, LLC. The managing members of the company will be Bev and Carl. The contributions to the capital of the business will be as follows:

                                          i.    Bev:                             $500,000 in cash.

                                         ii.    Carl:                            $200,000 in intangible property and $300,000 in cash.

                                        iii.    Other Members:          $4,000,000 (40 membership units @ $100,000 each)

                                       iv.    Total Capital:               $5,000,000

d.    Ehrlich & Michael, review pages 99-129, 370-374 and read pages 560-582

21.  Class #21 – Thursday, November 12:

a.    We will continue to work on formation, operation & dissolution of LLC’s. LLC focus Groups:

b.    Final Project: We will do a preliminary review of the FINAL PROJECT instructions. The Final Project is due Thursday, December 3rd no later than 4:00 pm. Submit the documents via Canvas

c.     Please review the Fact Pattern prior to the beginning of class: MS Word Format or PDF Format

22.  Class #22 – Tuesday, November 17:

a.    Review the Fact Pattern: MS Word Format or PDF Format

b.    Final Project --  Documentation of Limited Liability Company. We will concentrate on the following documents (available in the Google Drive Folder). Prior to class please download these Marked Documents from the Google Drive Final Project Folder:

1.    Final Project Instructions

2.    Investor Suitability Standards

3.    Subscription Agreement.

4.    Operating Agreement

5.    Investor Certificate

23.  Class #23 – Thursday, November 19:

a.    This will probably be our last class. You are encouraged to use class time to work on the Final Project. I will be available via Zoom for questions.

b.    Documentation of Limited Liability Company: We will concentrate on the following documents (available in the Google Drive Folder):

                                                i.    Risk Disclosure Document: We will take a close look at the Risk Disclosure document. What additional risks, if any, should we be including in this document?

                                               ii.    Virtual coffee & pastries

c.     We will use this class to answer any remaining questions about the Final Project and to chat about the Business Planning Course. I value any suggestions or input you have for improving the course.