Written Assignment Essay

Amanda Murray

Writing Assignment #1

In order to properly address which type of business organization would best suit Tawanna’s needs, this analysis will explore the various options available to her and the reasoning behind why certain options may not be a good fit for her unique business goals. Additional analysis will provide a specific business direction she should take as well as an explanation as to why such direction may be ideal.

            Tawanna’s entrepreneurial venture appears to be headed in the right direction. She has established herself as a sole proprietorship and has already received enthusiastic interest from investors. This early interest showcases the kind of potential this venture might offer. However, Tawanna has also expressed reservations relating to her lack of marketing experience as well as her concern with maintaining the level of creative input she currently enjoys. If she truly wants to expand and build a business that may some day go public, her early decisions are crucial for future success.

            As a sole proprietor, Tawanna has complete control. She can exercise the maximum amount of oversight with minimum interference. Until now, this has served her well. This simplified structure has allowed her to incubate her idea without the need for costly legal and accounting fees. However, this structure has also exposed her to unlimited liability for potential business debts and limits the kinds of funds she can raise. Without altering her business model, Tawanna will be stuck, unable to bring in investors and attract the kind of expertise she truly needs to expand.

            Moving forward, it is imperative that Tawanna first take steps to protect her intellectual property. Although it may be too costly for her to pursue a software patent at this time (even as these patents are becoming more difficult to acquire), she may consider such measures as filing for a provisional patent to allow her to establish an early claim to the functionality of her software. At the very least, she should insist that anyone to whom she needs to expose details of her software (and this includes potential investors such as Rashonda, Ashanti, Fabrice and Hector) sign an NDA. Software is “easily reverse-engineered with a wide variety of tools available today” (Boswell, 1). As such, one of the first tasks Tawanna faces is to reorganize her corporate structure in order to provide the flexibility she will need to satisfy her desire to raise funds while maintaining control. To achieve this, Tawanna must consider all of her options.

        One option available to Tawanna might be to form a General Partnership. Individuals who share common areas of expertise such as accounting and law usually take this approach. In a General Partnership, stakeholders are referred to as "partners" under corporate law and are usually available to work full-time and share the burdens of both work and debt. This does not seem to be the case here. While Tawanna might enjoy the ease of formation (General Partnerships can be formed orally, although it would be in her best interest to do so in writing) and the ease of raising funds, it does not appear as though the investors she has attracted have expressed any interest (or have much experience) in actually working for the business. This would mean she would have to find other interested parties to work with. Furthermore, this approach would diminish her control since there must be at least two general partners at all times with each owner having “an inherent right to control the business…” (Selkowitz, 2). In addition, it would expose her to unlimited liability since General Partners share joint and several liability for all business debts. Also, if she ever wants to go public, it would be much more difficult to convert to a C corp from a General Partnership than from other forms of incorporation. This makes a General Partnership inappropriate.

In a similar vein, a Limited Partnership, while ostensibly offering Tawanna more control than a General Partnership (since she could be the sole general partner) suffers from many of the same problems, i.e. the individual(s) who have expressed interest do not appear to want to actually work for a company, nor is it clear they are seeking an active role in management. On one hand, although forming a Limited Partnership would enable Tawanna to bring in expertise, while shielding her limited partners from liability, she would still probably have to give up some degree of autonomy since a Limited Partnership must have “at least one general partner and one limited partner” (Selkowitz, 6). In fact, most individuals who seek to become a partner in a company (limited or otherwise) tend to want some level of control in addition to compensation in the form of monetary rewards or membership interests. Similar to a General Partnership, pursuing this course would also expose Tawanna to unlimited liability as the sole General Partner, and would drain resources since an LP is “cumbersome to form” (Selkowitz, 7). Since Tawanna has made it clear that she wants to maintain control while simultaneously bringing in expertise, perhaps this option is not in her best interests.