Clothing Business To Manufacture Clothing For Women

Introduction: Taking cases to court is only one aspect of legal work. For example, many attorneys spend their time advising clients on drafting contracts, structuring businesses, and managing workforces. This assignment asks you to place yourself in the role of attorneys advising clients who would like to set up a new business entity.
Your Clients: Carrie and Samantha, friends and new entrepreneurs, have decided to start a clothing business to manufacture clothing for women. Carrie and Samantha must decide what type of business organization their clothing company should be. Here are their considerations:
They do not have much money in their personal bank accounts and are raising capital to start this business from investors. They cannot afford to use or lose any of their personal assets to the business.
The investors in the business are friends and relatives of Carrie and Samantha who have their own jobs. The investors want to invest in the business and possibly have an ownership interest but not be involved in managing it at all.
Carrie and Samantha have limited resources to spend on up-front costs. They need help deciding where to spend their money in the early stages: legal costs, space rental, branding, technology costs, etc. If they spend money on legal costs now, will they save money later?
Carrie and Samantha have limited management experience and may want to hire their friends Charlotte and Miranda to run the business for them.
Task: Your task is to draft a short letter, giving them advice on the following questions:
1. What type of entity would you suggest that they form based on their stated wants and needs and why? Are there others that also make sense?
2. What are the tax implications of your recommendation?
Review: Before working on this assignment, please review:
Chapter 9 in your textbook (and any other chapters as necessary)