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Running Head: JACK'S WATERFRONT
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Jack's Waterfront
Student Name
Institutional Affiliation

JACK'S WATERFRONT

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What should they be doing right now to protect themselves as they go about setting up their
new business?

In order to ensure that the court does not pierce the corporate veil, and ensure that they are protected
both at an individual level and the corporate level, it is very vital that they understand the
parameters within which they should operate.
The first thing that they should learn is premised on the fact that promotion is conducted by people
who form the idea of forming, starting and running a company. As a result, they ought to be alive
to the fact that the concept of company promotion does not include people who provide services
in a professional capacity to the company, and as a result, they have a very important role in
ensuring the success of the company. As a result, what they should be doing right now is to
familiarize themselves with their roles as promoters of the organization. For instance, they should
familiarize themselves with issues such as knowing that they are neither agents of the company,
nor trustees of the company, but they have an equitable fiduciary relationship with the company.
This is to mean that they have a duty to act in the best interests of the company. For example, they
must properly account for the monies that they handle on behalf of the company, otherwise they
can face legal criminal proceedings, in their individual capacities. Additionally, they must disclose
where they have a personal interest in a certain transaction, in order to avoid what legal jargon
commonly calls conflict of interest. Failure to disclose this information will lead to liability for
account of the secret profits which they end up making in the given transaction.
What entity should they form, and where?
In the above circumstances, the best entity to form would be a limited liability company. A
company, which is basically an association of many persons who contribute their capital worth to

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a common stock and who employs it to a common purpose, is an independent legal person for the
purposes of the law. These are the reasons as to why they should form a limited liability company.
First, limited liability companies are legal persons, with an independent legal personality from
their creators, and hence they can exist and function independent of their creators. Secondly, they
have a limited liability, which means that the resources of the founders cannot be taken and used
to settle the debts of the company. This is unlike sole proprietorship or partnerships; whose liability
is unlimited. Third, their registration procedure is quite simple, which involves launching of
articles of association and memorandums of Association, which basically outline the functionality
of the company. In addition, the company’s activities can be diversified, unlike partnerships, which
are formulated for a specific purpose, and as a result, the company can engage in different activities
that are more profitable to it at the at the end of the day. With regards to taxation, the company can
always apply for a tax holiday for a given period of time after incorporation, which enables it to
start making profits before it can start paying taxes. In addition, the only tax that the company is
required to pay is corporation tax, which is tax paid from the profits that the company has made in
a given financial year.
What should they consider when they are putting together the capital structure of the
business?
The first thing they need to consider is the likely returns they will get from the business. This is in
order to inform them whether they need to increase the capital base of their company, or they may
need to rethink and structure their company undertakings. This can be done through profit
projections of the area they want to venture in.

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In addition, they need to sit and agree on the profit sharing formula. This can be based on their
capital contribution ratio, or through adopting another sharing formula, such as assigning
themselves shares, instead of profit sharing ratio on the basis of capital contribution. This should
be informed by market dynamics, as well as the survivability of the company, at the expense of
sharing profits.
In addition to the above mechanisms, they can also decide to award themselves some more
benefits, depending with their level f involvement in the day to day running of the organization,
such that the more active members in terms of management, have some additional monetary
benefits, as opposed to those who are just shareholders.
What measures should be put in place to control the organization?
First, the company management needs to determine the organizational structure, with regards to
human resource management. This is based on the fact that they need to hire the right people for
the job, in order to ensure that they realise the company objectives with the minimal cost
implications.
Secondly, the relationship that the organization establishes with the outside world is very vital in
ensuring effective control of the organization. This is because the company cannot survive on its
own, and needs the other external stakeholders such as suppliers, customers and the gov...